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Multiple banks in India have started to offer interest on NRE fixed deposits – as high as 9.6% p.a. In order to appreciate this deal better, you first need to understand who can take advantage of this deal and what does NRE stands for. Basically for Non Resident Indians (NRI) there are three types of bank accounts which can be opened in India – NRE, NRO & FCNR. You can read in detail on these three accounts on our website https://banyanfa.com/banyanfa/nri/bank_account.html.

Income Tax Act in India allows all interest from NRE bank account as TAX FREE. Contrary to this, interest from NRO account attracts flat tax deduction at the rate of approx 30%. So now you can appreciate that Tax Free interest for NRIs would be an attractive deal. To make it more attractive, let me give a brief history around NRE fixed deposit interest rates.

 

History

I believe NRE fixed deposit were one of the lowest interest paid deposits within India for a simple reason – the interest on such deposits was tax free. Banks hence never thought about increasing the interest rates beyond 3-4% p.a. So if you had booked a FD for Rs. 10 lacs, you would have not got more than Rs. 40,000 per year. Possibly, the banks were always aware that even if the NRIs went for NRO fixed deposit which offered much higher rates of interest, the after tax yields would be a bit higher than NRE interest rates. Further the added benefit of free repatriation of NRE deposit and its associated interest income further added to the bank’s incentive to keep NRE interest rates down to less than 4%.

 

Why are NRE Interest Rates at 9% plus now?

I must call it that if the banks could prevent, they would have definitely kept the interest on NRE fixed deposits where they always used to be. However, a combination of multiple factors forced the banks to increase the NRE interest rates to 9%. These factors are:

1. The primary reason is Life time high Foreign Exchange rate (USD / INR at 53.5 Rs.). It prompted Reserve Bank of India attract NRI remittances to tame the rising rupee. Increasing NRE deposit interest rates to over 9% would attract a lot of foreign currency into India which would in turn increase the supply of foreign currency in India and hence reduce the exchange rates.

2. High Inflation and interest rate scenario prevailing the economy influenced the high NRE deposit rates.

 

Is it Really good opportunity to invest in NRE FDs ?

In our opinion, this is an excellent opportunity to give a good run to your money. Money creates money. Investing your funds into NRE fixed deposits would provide you an opportunity to gain a good return in the current volatile economic situation. Even resident Indians don’t have this opportunity. For resident indians, any interest income on fixed deposits over Rs. 5,000 from a bank is liable to an upfront 10% tax deduction (TDS) and is residual is also subject to tax. NRE fixed deposits would not be subject to TDS and entire FD interest would be released to NRIs as tax free income in India.

 

Interest Offered by Different Banks

Different banks are offering variable interest rates. As an illustration, we have noted a few options available from the leading banks in India (at January 2016):

Banks Tenure
Upto 3 years More than 5 years
State Bank of India 7.50 7.00
HDFC Bank 8.75 8.25
ICICI Bank 7.75 7.50
Kotak Mahindra 7.65 7.25
Axis Bank (greater than 15 lacs) 7.75 7.5
You can visit the respective bank’s website to find their latest and detailed rate charts.

State Bank of India http://www.sbi.co.in/portal/web/interest-rates/nre-fixed-deposits

HDFC Bank http://www.hdfcbank.com/nri_banking/accounts/rates/nre_interest_rates.htm/

ICICI Bank http://www.icicibank.com/nri-banking/RHStemp/rates.page?

Kotak Mahindra Bank http://nri.kotak.com/Kotak_BankSite/nri/interest-rates.html

Axis Bank http://www.axisbank.com/download/Interest-Rates-on-NRI-Deposits.pdf

 

How to Invest

Best way to capitalise upon the NRE tax free fixed deposit is to lock in for a long term in these deposits. 10 years is a good time frame to go for with these fixed deposits. We would advise you to go for SBI or any equivalent bank which is currently offering 9.25% plus for a 10 year deposit. There are multiple options to go for:

1. Invest in 10 years FD with cumulative option for interest payout. This would provide principal plus interest accrued there on at maturity.

2. Invest in 10 years FD with a quarterly interest payout. Invest the subsequent interest payouts into a monthly SIP of a mutual fund. This would safeguard your initial principal amount. Only the interest payout would be invested into an equity oriented mutual fund. The investment into SIP would give an equity market kick to your returns. 10 years SIP out of interest payout is a healthy period to provide an opportunity for equity SIPs to grow. I would not be surprised if by end of 10 years your initial deposit plus the value of the associated SIPs touches 4-6 times of your initial investment.  In essence it would be a capital protection scheme which you can create by investing the interest into Equity SIPs. We specialise in creating such products for our client and if you need any assistance or guidance, please free to contact us via our website (https://banyanfa.com/banyanfa/contactus.asp). You can find more about how SIPs can create value for you by visiting our blog note on How SIPs Work

3. You must take care while booking your fixed deposits. Since these are long term fixed deposits, there is a likelihood whereby you may need to use fixed deposit funds. Please refer to our blog note on Fixed Deposits – How to Benefit the Most Out of them  where we have explained multiple options which you can use while opening fixed deposits.

 

This blog reflects the opinions of Banyan Financial Advisors. You can contact us on www.banyanfa.com.

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272 Responses to NRE Fixed Deposit – Should you invest in it ?

  1. amit says:

    Excellent

  2. […] Us « NRE Fixed Deposit – Should you invest in it ?  […]

  3. DM says:

    Would the interest income be added to the global income of an individual ( if he is investing in NRE FDs ) ? Does DTAA has an act to cover this ?

  4. Hi,
    While NRE FDs are tax free in India, it doesn’t mean that they are tax free in the respective foreign country where the NRI is resident of. It gets added to their global income and gets taxed as per their respective tax slabs. DTAA does apply, but in this case since there is no tax in India, NRIs would have to pay the higher tax in their respective foreign country.

    Regards
    BFA

  5. State Bank of India has informed that it shall cut the Interest rate of FDs from 24 April 2012 by 0.25% to 1%. Further details are awaited on exact interest rates in each of the tenure.

  6. nikita says:

    my brother is an nri n he is investing in fds in india through his bank account in india in indian currency so will this income be his indian income or foreign income? does dtaa apply? he is presently residing at texas in USA

  7. Hi Nikita
    So that I can provide you an appropriate response, can you please tell me what type of bank account has he invested in FDs. Is it normal resident saving account, NRO, NRE or FCNR ?

  8. Danish Bhatnagar says:

    Hi… I have question. I am working in Taiwan (Taiwan and India has DTAA Agreement. I want to know if I send Money to my NRE Saving acc. and then do NRE fixed deposit. The principal and interest will be tax free? Can i used this money to settle my expenses i India. Do i need to pay any withholding tax if i came back to india after 15
    months?

  9. Hi Danish,
    Interest on NRE FDs is tax free in India. Principal amount would not attract any tax as it is not an income. You can use this interest income for whatsoever purpose you like. No tax is required to be paid to spend the interest earned on NRE FDs, even after you return back to India.

    However, you may want to consider your tax liability in Taiwan, considering you would be a resident tax payer in Taiwan. Generally most countries would tax you on your global income if you are resident in that country as per the respective country’s tax laws. Hence, even though a NRE FD would be tax free in India, interest on such FD may need to be disclosed in Taiwan. I am not aware of tax laws in Taiwan, but you may have to pay tax as per the slabs in Taiwan on your income in India. But please consult the tax advisors in Taiwan for this matter.

  10. Sid says:

    Is there any restrictions on using funds provided by american investors who are looking to benefit from these FDs

  11. Sid,
    There is no additional restriction, except what gets covered under normal Indian banking rules – use it for all legal purposes :)

    May be I didn’t get your query ? Would you mind giving more details as to what you are after ?

  12. Yogee says:

    Hi,

    I’m an Australian Citizen born in India ( I haven’t applied to OCI/PIO yet). Am I eligible ?

    Regards

  13. Hi Yogesh,
    If you can prove that you were born in India (probably via your passport), then you can invest into NRE FDs. You would need to open a NRE bank account which doesn’t need a OCI card as long as you can prove that you are a NRI (via your place of birth). After that you can get your FDs done via the same bank account. A better approach would be to divert the interest of the NRE FDs into Equity SIPs to give a more long term Return. Let me know if you need help in that.

    Regards
    BFA

  14. Amit Gupta says:

    Sir, if a book a 10 year FD and attain resident status again after 5 years, do I need to prematurely break the TD or it can continue?

    Regards,
    Amit

  15. Amit,
    It is a very interesting question. I have recently clarified it with SBI and what I have been made to understand – you do not need to prematurely break the TD. However, there may be a tax impact as follows :
    1. No TDS would be deducted as there is no requirement in law to deduct TDS on NRE Deposits.
    2. However (as per SBI’s RM) – you should then declare the interest as taxable income in your India’s tax returns. I some how don’t agree with it. I am now aware of any provision in law which details upon this. Hence, I would rather not declare it as Taxable income.

  16. Amit Gupta says:

    Thanks a lot sir for the valuable advice. Actually , I am bit more concerned about if bank can ask me to prematurely withdraw th TD as they do so for conversion of NRO account ot resident and NRE to RFC accounts.

  17. Yogesh Vyas says:

    Dear Sir,

    I currently hold NRE FD with Cumulative Interest feature.

    I wish to make further investments in new NRE FD with SBI and wish to make it for a min of 3 years and above.

    However I am worried if my resident status changes from a NRI to resident Indian before maturity of these FD, then could the Interest on these FD at the end of 3 years attract tax in India on change to resident Indian status.

    Currently I am working in Mauritius and resident on a work permit.

    Please guide me with relevant tax rules.

    Regards
    Yogesh Vyas

  18. Hi Yogesh,
    Your query is exactly responded my response to Amit Gupta’s query.

  19. Sahil says:

    I am living in USA and have NRE/NRO account with Axis Bank in India. I am planning to put some money in Axis Bank FD as NRE for one year. I am planning to buy house in USA after a year so do need to repatriate the money back to my US bank account. I would like to know how easy/difficult it is to get money transferred from Axis Bank NRE account to my account in US bank.

  20. Amit Gupta says:

    Hi Sahil,

    In my opinion, you should consider investing FCNR deposit instead of NRE deposit as NRE deposit has exchange risk rate and this exchange risk may ruin in your interest income. Repatriation of funds would not be an issue

    Regards,
    Amit

  21. Sahil,
    As Amit mentioned, if your tenure of investment in India is just 1 year, then I would rather not remit funds to India as you never know which side of the fence you may be sitting if the Exchange Rates fluctuate violently. Even 1 year FCNR FD would give you just around 3%. I am not sure, but probably you would get around 2-3% interest in US for a 1 year deposit.

    Repatriation from a NRE / FCNR account is a simple procedure, however, it would require some paper work – filling and signing of physical forms would be required. Please contact your relationship manager to get more details on that as well as charges.

    Do not use NRO if you need to repatriate funds to US as the formalities for repatriation are a bit complex – involving certificate from a Chartered Accountant, etc.

  22. john doe says:

    Hi,
    I am going to become an NRI soon and I have two questions about your article:
    about 40% total of my income goes into tax once I start working in the US.

    Let’s say I put something into NRE FD and from the interest earned each year (I lakhs) and from my own contribution (M lakhs) each year, I deposit (I+M) lakhs each year into SIP (divided by 12 for monthly investments if you may) for 15 years or 20 years.

    I understand that I’ll have to pay tax on I lakhs in the US. So I’ll be paying atleast 0.4I out of my pocket for tax.

    1) My main concern is if I need to pay taxes in the US for my SIP investments too. I can only expect it to mature after 15 years or 20 years. How to decide how much to pay yearly for US income tax? How much do I need to pay after it matures?

    2) What if my SIP plan is for 20 years, but I return to India for good after 15 years? Will I be escaping paying tax in the US for 5 years and just pay whatever is applicable in India for those 5 years?

    3) 4-6 times in 10 years looks really appealing, almost too good to be true. Shouldn’t this be a high risk investment then? How much is expected in 15 years? 20 years? Is it advised to keep my money as long as possible in SIP maybe until retirement or so or else to keep “refreshing” it after 10 years? Here’s a lay theory: if it becomes 4-6 times in 10 years, will it become 16-36 times in 20 years? (assuming it is “cumulatively” re-invested). If the expected return after 20 years is much less than 9-16 times, then I don’t see any motivation to invest for 20 years.

  23. Hi John,

    1) You won’t have to pay taxes on the SIP investments USAIndia, as long as you don’t sell the investments. You are correct that you would have to pay interest on your NRE FDs in US.
    2) If you return back to India, do not sell your investments in India for atleast 182 days so that you become a resident of India. Once you sell your investments in India after 182 days, you would escape US taxman.
    3) 4-6 times is not too good to be true. If you leave your NRE FDs to compound the interest for 10 years, then Rs. 100 at 9% shall become around Rs. 250 (Quarterly compounding option) or 2.5 times. Indeed, the investments into Equity Mutual Funds is more risky than a Fixed deposit and hence a higher return is assumed. The longer you invest, the better are the returns. 4 times return is based upon an assumption that Equity Markets would give a return of 15%. The higher the markets would be in next 10-20 years, the more the returns would be.

    I would also encourage you to open a PPF account if you are still a resident. Have a read of my article http://insight.banyanfa.com/public-provident-fund-ppf/ which you can continue to invest even while you are a NRI for 15 years.

  24. Sahil says:

    Amit, thanks for your reply. I am actually considering to invest in NRE in place of FCNR as I anticipate IR to appreciate when compared to USD. Within a year, I am guessing UPA will open up FDI in at least few sectors which will result in rupee appreciation. If rupee appreciates by about 3% and I get interest of 9%, combined return with be about 12%.

    I understand there is risk to it and I am not planning to put all eggs in one basket. But the portion I can put in this basket, I do want to ensure that I am able to get that money back easily.

  25. john doe says:

    Hi,
    Thanks a lot for your reply.

    1) I need some info about tax implications in India once SIP matures, how is it calculated for SIP, like: if I invest m rs, every month and get a return of R rs at the end of k months, assuming I fit into the 30% tax bracket, will I have to pay 30%(R-mk) as income tax?

    2) Are there SIP like vehicles in the US too? I think I imagine there’s going to be a lot of paperwork for an NRI to invest in SIP schemes at some company in India.

    3) In case I become a US citizen in the future, will my NRE FD account become invalid?

  26. John,

    1) SIPs don’t attract special tax. The tax treatment is dependent upon the underlying mutual fund. Have a read of http://insight.banyanfa.com/tax-implications-of-mutual-funds-on-residents-and-nris/ which details on all possible tax impacts.

    2) There may be such options in US.There is no extra paper work for investing in India for NRIs. We have got this done for several of our NRI clients. If you could email me your contact details (info@banyanfa.com), I could help you out.

    3)No – NRE FDs don’t become invalid even after your become US citizen. The reason being, after becoming US citizen, you are still a person of Indian origin.

  27. Raghu says:

    I am working in Bahrain.I Have NRE account in Canarabank.I am planning to open FD for 13 lakhs for duration of 6 months.Please advice whether to go for NRE FD or Normal FD.

  28. You should go for NRE FDs as they are tax friendly in India and hence won’t attract TDS. May I ask why do you want to concentrate upon just 6 months and not longer ? Whether to go for NRE FDs or not all depends upon your investment objectives. However, if you have to choose between NRE FD & normal FD, then I would certainly suggest NRE FDs due to benefits listed in the article above.

  29. Mahesh says:

    I want to invest my NRE Money in SBI NRE Fixed deposit scheme But I Want to know, after maturity period that money can remain as NRE Money…? It Can Remain In My Same NRE Account…?

  30. Mahesh,
    I am assuming that you know how Fixed Deposits work. If not, please let me know and I shall try to clarify that.

    To answer your query – after maturity, the FD amount plus any interest there on would be credited in your NRE Bank account (unless you opt for booking fresh FD at the time of maturity while opening the FD). Once the funds are credited in your NRE bank account, you are free to use it for any purpose (including remitting outside India).

  31. Mahesh says:

    Thanks….
    Yes Please Let Me Explain In Detail How NRE Fixed Deposit Work.

  32. Mashes,
    Details on NRE FDs are already mentioned in the article above. It follows the same rules as of a Fixed Deposit. You can read them at http://insight.banyanfa.com/fixed-deposits-how-to-benefit/

  33. masalhw says:

    Hi, I am very happy to read your various suggestions in this column. I have this request.

    I am an NRI holding a PIO and in the process of selling my flat in India.

    Can I invest in FD with the amount I get from the buyer for a3 yrs and can I take out the interest out monthly with any tax deduction.

  34. Hi,
    NRE FDs can only be made from the funds in your NRE bank account. Generally proceeds of your flat in India would get credited into NRO account which gets classified as a normal bank account in India and attracts a flat 30% TDS on interest payout.

    There are provisions whereby if you paid for your flat via the funds in your NRE account, the original amount can still be credited into NRE account and then you can make your FDs. Any capital gain would have to probably go into NRO account and would unfortunately not have access to NRE FDs.

    Regards

  35. Charanjiv Singh says:

    I need information regarding the IT rules regarding the Interest earned on the FD’s from my NRE account once I revert back to Resident status ? For how long is the interest Tax free ?

  36. Charanjiv,
    You have picked up a very interesting point. There is nothing in the tax laws which says that if you are a resident, the NRE FD interest becomes taxable. It just mentions that NRE interest is tax free.

    The pickup point may be with your respective bank who may (if they are very very very deligent) ask you to liquidate your NRE FDs as you have turned a resident. Again, if you refer to the terms of opening your FDs, perhaps there would be no reference to say that you need to liquidate your NRE FDs if you become a resident. Though it does mention that you would have to surrender your NRE bank account once you are a resident. I leave the decision to you.

  37. Charanjiv Singh says:

    Thanks for your reply.

    Any period for which the NRE status is extended as my problem is even more confusing.

    I have a relevant employment visa valid till 2013 June. I had to revert to India since 15 June 2012 due to lack of work. The company did not cancel my visa as require my help. They called me from 20 July 2012 to 13 Aug 2012. Now I am not sure if I will be able to complete 182 days abroad till 31 March 2013 ( this year spent 99 days abroad till now ).

    From 01 April 2005 till 31 March 2012 I have spent only 541 days in India so I am under the 729 days limit for the past 7 years.

    What should I do – when should I inform the bank. That is why I need advise of the period my NRE / RNOR extends to and how will it effect my deposit / interest. My deposit mature in July 2013.

  38. Vinod says:

    Hi,

    After following Insight for two months, I finally opened two fixed deposits for 10 year (cummulative reinvestment of interest in HDFC Bank).

    HDFC bank sent me the following, which I didnot understood “Submit Form 15G/15H to get TDS waiver for this financial year at the earliest. Please ignore if you are not eligible for the same or have already submitted.”

    Can you put some insight on Form 15G/15H. How can I fill them and whom should I send it to etc..

  39. Hi Vinod
    Form 15 G/H are to be submitted with the bank in case the depositor is not subject to tax. Examples of such cases are where your income is less than the taxable slab. Such a declaration is to be submitted on an annual basis.

    Interestingly, NRE FDs are not subject to tax as they are tax free. Hence the clause of TDS is not applicable to NRE FD depositors. However just to avoid any procedural error by the bank, you may contact your bank relationship manager and let him know that you have a NRE FD and hence the requirement of 15 G/H should not be applicable.

  40. If your deposits mature in 2013, you may want to hold on informing the bank. I think you have around 6 months to get your account status converted into resident. I have not seen banks enforcing this religiously. And you can still declare this interest in your tax returns as tax free.

    Hope that answers your query.

  41. Charanjiv Singh says:

    Kindly clarify –

    1. Which is the current rule applicable for RNOR status last 4 years ( 365 days ) / 5 years ( ? days ) / 7 years ( 729 days ).

    2. After current year when one becomes resident for how long is the foreign Income / Interest tax exempted ?

    CHARANJIV

  42. tejas says:

    I am working in a shipping company and have an NRE account. I have a few SIPs linked with this account which were started in May, 2012. I have doubt regarding the following:

    1) After one year, If i need to redeem the complete fund value back to my account will there will be any tax deduction?

    2) Will schemes and MFs etc other than SIPs which are linked with my NRE account attract any deduction on redemption?

    3) How will debt funds be beneficial for me? Will they offer the same liquidity as funds kept in NRE savings bank account?

    Thanx.

  43. Tejas,
    1 & 2 – If you invest after 1 year, then there would be no tax provided it is Equity Mutual Fund.
    3) Debt funds would provide you less volatility from investment perspective. But they are not tax friendly. They are liquid – just need 3 working days (generally) to redeem the funds.

    Check out http://insight.banyanfa.com/tax-implications-of-mutual-funds-on-residents-and-nris/ which details on tax aspects of Mutual Funds on NRIs.

  44. Charanjiv Singh says:

    Kindly clarify –

    1. Which is the current rule applicable for RNOR status last 4 years ( 365 days ) / 5 years ( ? days ) / 7 years ( 729 days ).

    2. After current year when one becomes resident for how long is the foreign Income / Interest tax exempted ?

    CHARANJIV

  45. Chiranjiv,
    1. I think you have a good idea of the complications involved in RNOR concept. It is a combination of multiple factors – to big a topic to explain here.
    2. I have already responded to your 2 question in your previous query (if it relates to NRE interest). If you are after foreign income / interest, if you become a resident in India in a financial year, then your foreign income becomes taxable in India in that FY.

  46. Suresh chatakondu says:

    Hi
    I have question
    If I invest in dollars in NRE Fixed deposits for 5 year term
    The bank s owing to give me at maturity the existing exchange rates am I right?
    What if the current exchange rate of 53.5 I invest and when at the maturity If the exchange rate is 60 or 65
    I am going to get less invested dollars. Am I right?
    What are the risks associated with NRE Fixed deposits?
    Pls suggest

    Suresh

  47. Hi Suresh,
    You have perhaps highlighted one of the weaknesses of NRE FDs – foreign exchange fluctuations. However, it is embedded in all overseas transactions – something you can’t avoid. The scenario highlighted by you is very much possible. However, looking into the probability of exchange rates being at 60 in times to come – perhaps I would term it as unlikely as it would adversely affect the economy. And if it touches 60, the government and the RBI will take all steps to cool it down to comfortable levels.

    Other risks – are same as associated with any fixed deposit.

  48. Jason says:

    Can money from an NRE account be withdrawn in INR in India for miscellaneous expenses?

  49. Sid says:

    Thank you for a wonderful article. My query is as follows:
    1. Mr. X, a French citizen came to know that the interest rate on savings (Fixed Deposit) in India is 9% and that in France is 3%. Consequently, he entered into an agreement with Mr. Y, a Singaporean citizen and a person of Indian origin (PIO) wherein Mr. X agreed to transfer a sum of 50,00,000INR to be deposited in a FD @ 9% in a NRE A/c. The PIO agrees to remit back interest (@ 8%) every month by keeping 1% as his commission.
    2. Mr. X also entered into a separate Loan agreement with Mr. Y wherein a loan of 50,00,000 INR was given to Mr. Y @8%. Mr. Y agreed to deposit the interest @ 8% monthly in the foreign account of Mr. X.

    Could you please examine the validity of the aforesaid agreements with respect to Indian Laws viz. FEMA; RBI regulations, Money Laundering Act, etc. because now Mr. Y has refused to pay the interest or the principal and there is a possibility that no recovery can be made by Mr. X since the object of the agreement was to flout applicable Indian laws and therefore illegal. Would be grateful if you could please explain the applicable laws on this in detail.

    Thanks in advance.

  50. That sounds like an interesting way to get entry into Indian NRE FDs by non POIs. However, if things were very transparent in terms of legal agreement between X & Y, Mr. X can definitely sue Mr. Y for recovery for principal plus interest as what Mr. X is doing is just providing a loan @ 8%. If you look at it, Mr. Y doesn’t have any funds to invest into NRE FDs and hence he is borrowing @8% and earning 9%.
    I am not aware of any FEMA requirement which prohibits such form of transaction, specially for Mr. X who is dealing only with Mr. Y and not in INR or India. If at all, Mr. Y should be bothered who may be doubly hit – one by International laws to pay Mr. X and by Indian laws for contravention of Indian laws (again if any). However, I would suggest to take a legal opinion.

  51. Vinny says:

    Today is 1/9/2013. I invested in NRE Fixed Deposits worth about Rs. 15 lakhs in last six months at different times for 5 year and 10 years. Is it still lucrative to invest more now.

    Do you know if the banks would stop issuing fixed deposits after March 31st, 2013? especially HDFC Bank (current rate is 8.25%),is there a possibility for reduction in interest rate in future?

    Thanks in advance

  52. Vinny,
    I don’t believe that the banks would stop issuing NRE FDs. However, the interest rates being offered by the banks shall definitely on a down trend. Whether or not to futher invest into NRE FDs is a decision which needs to be taken on a case by case basis.If you have no other investment avenues, it definitely stands out as a good investment option.

  53. sunny says:

    Hi. Thanks for answering all our queries.

    I live in singapore and im planning to move to India in 2 months time.
    I have a NRE account in HDFC bank and i find other banks (IDBI, Mahindra) giving better interest rates for FD’s.
    ——————————————–
    1) Can i open a new NRE account and move all the money into the new NRE account?
    2) should i do that before i move to India?
    3) Once i move to India should i inform my bank and convert my NRE A/C to Resident account?
    4) Can i continue to keep my NRE A/C even after moving back and enjoy the tax benefits on the interest from FD’s

    Kindly advice.

  54. Amit says:

    Sunny,
    1) Can i open a new NRE account and move all the money into the new NRE account?
    2) should i do that before i move to India?
    >> Once you return , you would need to close the NRE account and there is special account in which you need to move your money
    3) Once i move to India should i inform my bank and convert my NRE A/C to Resident account?
    >>NRE A/c is not converted to resident account only NRO account is.
    4) Can i continue to keep my NRE A/C even after moving back and enjoy the tax benefits on the interest from FD’s
    >> I had this question last year and based on what I understood, you can keep your FDs and bank will not charge TDS but you need to declare in your ITR and pay tax or else instruct bank to deduct TDS.

  55. 1) Yes you can
    2) I would suggest that. Because once you are in India as a resident, you will not be eligible for a NRE accont;
    3) Ideally yes.
    4) This is a very grey area. There is a lack of guidance on what is the implication of NRE FDs booked by NRIs once they become residents. I don’t believe that there would be a tax impact as even Income Tax act does not mentions about this. All what it mentions – interest on NRE accounts is tax free. Hence if you continue to maintain your NRE FDs, I would believe that the interest on them would be tax free.

    @ Amit – do you have any reference materials based upon which you have answered point 4 ?

  56. Amit says:

    when I checked with different banks, they say that once you return you customer profile becomes resident and you cannot have both resident profiles and non-resident profiles together

  57. I completely agree with this statement. However if you do not choose to bank with such bank when you are resident, what stops you from maintaining your NRE FDs. From my understanding there would be no contravention of law as no further FDs are being made as NRE.

  58. rahul says:

    excellent analysis …

    is it possible for myself who is in india to get nre account ???
    i am ready to go outside n stay and work for few months and com back with and nre account
    can u tell me the minimum qualification to get an nre account ?? n once i get an account . is it possible for myself to come back to india and have my normal life ???

  59. Rahul,
    While you are an Indian Resident, you can not get a NRE account. If you leave India for employment, you may qualify as a NRI and hence open a NRE account.

    For more details on NRE accounts, you can refer to my article :
    http://insight.banyanfa.com/types-of-non-resident-bank-accounts-nre-nro-fcnr/

    Interestingly, NRE account would not affect your normal life :) Howver, I can not advise you to maintain your NRE account and still be classified as a Resident Individual.

  60. rahul says:

    thanks you bro

    i was jus looking for options 😀 ..i dont think the foreign trip will be worth ma tax anyways 😀 … i might end up putting my money in some cooperative banks and MIPS :)

  61. sourabh Sharma says:

    Hi,
    I have couple of questions to clear on NRE accounts:

    Assumptions :
    —————
    I have an NRE account, and investing amount X monthly.

    Questions:
    ————
    1) If I go back to India permanently after few years, can I close/change my NRE account to saving account (or anything else)? Considering I dont want to give any tax on this amount after I go back to India.

    2) Lets say, there are no chances on tax saving once I come back to India.
    What if I transfer the entire money to some another person (as a GIFT, which is not taxable) ?
    What will happen then ?

  62. Sourabh – apologies, but your question is not very clear to me. You can convert your NRE account to a saving account in India once you return back permanently.
    I don’t understand why you are linking the tax with closure / change of account.

    For 2) Please can you detail a bit more what income you want to save tax on ? Is it NRE interest or any other income ?

  63. Jay says:

    I am US citizen but born in India and want to invest in FD’s in Indian Bank. Will I be considered as a foreign citizen or NRE or NRI or NRO. I would also would want to know what would be the interest rates in general would the Indian Bank will offer.

    Thanks

  64. Jay
    You can invest in India as a NRI. The options are via Two different types of bank accounts – NRE or NRO. Each bank in India gives these two options to invest. Search for this on my blog for details on what NRE and NRO are

  65. Kay says:

    I had opened a FD in Axis bank where I have a NRE account. Its now going to mature next week and someone told me that I need to go to bank and sign to claim it back. I was under impression that as I had opened the FD online from UK, the maturity amount will be credited back into my account on its maturity? is this not correct? please advice

  66. Kay
    I don’t agree with the view told to you. The FD if booked online with an option to credit proceeds on Maturity should be credited automatically. You can email Axis customer services to double confirm this.

  67. Jatin says:

    Hi,
    I am an Indian Born, Australian citizen. I was looking to invest in NRE FD in India. I understand that, the interest earned on this FD will be tax exempted in India. How about Australia Do I have to pay Tax here?????

  68. Jatin
    You are probably correct. While NRE FD interest is tax free in India, it may not be tax free in your resident country. Please consult a tax expert in your country on the impact of tax on your Indian income.

  69. A Garg says:

    I am an Indian citizen stayed in abroad for more than 6 years.
    I have both NRE and NRO account. I have some FDs in NRE account.
    I returned back to India around July last year with an intention to return back to abroad with in couple of months. But because of some personal reasons I decided to settle here in India.
    Now I am no more an NRI. I have some confusion regarding my NRE/NRO accounts:

    1) I have some amount in my NRE account and NRO account? Do I necessary have to close these accounts as I am no more an NRI?

    2)What will happen to the FDs invested in NRE account? if I choose to close my NRE account then I have to prematurely close my FDs also as told by my Bank.

    3) I still have some money left in my foreign bank accounts. Can I transfer these funds to my NRE account and invest them in NRE FD?

    4) As read your posts there is a grey area on taxes on the interest on NRE FDs. My FDs will mature in 2015. Shall I disclose it as taxable income when I file ITR in 2015 or there is no need for that.

    Thanks in advance.

  70. Hi Asit,
    Unfortunately there are limited right and wrong answers to this query. To keep your bank happy, you may be asked to convert your NRE / NRO accounts into resident accounts – which may mean prematurely closing of your FDs.

    I believe a better option is to avoid doing any further transactions in the bank where you hold your NRE / NRO account and shift all resident transactions to a different bank. Every year in your tax returns disclose NRE interest as tax free interest and I believe you do not need to pay taxes on it. But by disclosing such interest, you have shown that you are not hiding any income. Hence there is no need to terminate your FDs till maturity.

    For funds in your foreign account, I would suggest you to send them to your resident account now.

    If any one on the board has a better response, please could you pitch in.

  71. Mihir Bhatt says:

    I have NRE FD in India. Interest Accrued on NRE FD is taxed in USA on accrual basis

    Or it will be taxed at the time of maturity ?

    Regards,

    Mihir Bhatt

  72. Mihir,
    I am not a US tax expert, but I have some understanding of it. You may refer to http://www.irs.gov/publications/p550/ch01.html#en_US_2012_publink10009983 which clarifies the tax treatment. NRE FDs may be classified as Original Issue Discount (OID) and hence its interest may be taxable on accrual basis. However, I would suggest you to get this clarified from US CPA.

  73. Sans says:

    I am living outside India for more than 7 years. I have not closed my saving bank account which I opened while I was in India. Now I have a NRE account too. I have money in both the accounts. Would this have any negative impact?
    I often use my Indian saving account for miscellaneous expenses. I am also planning to create a FD from that account. At the same time, I am intrested in opening FDs from my NRI account. Is this possible?

  74. Sans,
    Legally what you are doing is not correct. You should convert your Saving account into a NRO account.

  75. Manish says:

    I am a PIO living in USA. I opened a 10 year fixed deposit/ NRE account last year. Am I required to pay taxes on interest earned in year 2012 and yearly till maturiy or do I pay taxes when i get all monies upn maturity. With rupee depreciation from 51 (when I opened account) to 55 towards Dec end, can I now claim capital losses ??
    Thanks.

  76. I am not sure about the capital losses – which I would suggest to look into it at maturity considering it would swing every year. However, for your interest, you should be paying taxes on a yearly basis in US.

  77. Praveen says:

    Hi ,

    This is Praveen and I live in Chicago.I have NRE and NRO accounts with ICICI bank in India.My core objective is to invest the amount and repatriate back to USA.Now say If I deposit X rupees in NRE FD which gives my Interest “I”.

    1.While filing the taxes,how to inform the USA government that “I” is the amount which is additional source of income to me.Do I get anything from bank which I can present?
    2.Correct me If I am wrong.I am assuming that If I am in 30% tax bracket then this amount will also get flat 30% tax cut.
    3.I opened these accounts in 2013 so am I supposed to inform US tax dept that I have opened these accounts (Filing FBAR)or am I supposed to inform them when I file tax in 2014?

    I do have other sources by which I generate income in India and they give good returns and hence I would like to check what % of the amount will be deducted If I transfer the money to NRO account or other sources which makes the fund non repatriable.
    say X in transferred to NRO account in INDIA and It generates interest of I.Of the total amount,how much am I supposed to pay to Indian government and how much to US government.I guess US should be zero.Please clarify.

    I really appreciate your effort in clarifying our questions.

  78. Praveen,
    My responses are :
    1. Banks generate total interest income statement. You can raise a request with your bank. Alternatively, you can compute the value yourself by looking into the interest credits in your NRE account.
    2. For NRE FDs – no tax cuts in India. For NRO, there would be a 30% tax cut in India;
    3. I am not sure abou the exact time when you need to inform US tax dept. I believe that this is to be done annually at the time of filing tax returns. I would suggest you to contact your CPA.

    If you transact via NRO account, ideally all income will get taxed via a TDS in India. You can then use the TDS figure to claim tax rebate in US based upon double taxation avoidance treaty. It is a complicated process and not something which I can explain in a few lines in this forum.

  79. Mandar says:

    Dear BFA,

    I had opened FDs before becoming NRI and its getting auto renewed upon maturity. So I earn interest and Bank is deducting 10% TDS.
    I was told that there is no need to file tax return as I dont have any salaried (taxable) income in India.

    My questions –
    In my case, is it compulsory to file tax in India ?
    Can I still hold those FDs being NRI ?
    Can I terminate FDs and put FD money into NRE account to repatriate out of India ?
    If not, what is the best way to transfer money ? How do I know what are the charges and what is the process ?
    Is it allowed to get rental income deposited into RI bank account ?

    Thanks
    Mandar

  80. Mandar,
    My responses are :
    1. It is not compulsory to file tax returns in India, unless you have taxable income. In your case you may be entitled to refund as the TDS may not have considered eligible tax rebates available to NRIs. For this you should file a return to claim the refund.
    2. Ideally you should inform your bank who may convert the FDs into NRO status or upon maturity will not autorenew.
    3. You can not put the maturity proceeds into NRE account. They will be credited into NRO which can still be repatriated out of India but with some formalities.
    4. After you become NRI, you should not have a RI. You should convert your RI into NRO and get your rental income deposited into NRO.

  81. Padma Bhushan says:

    1) what is best time period for which i can book my nre fd, as i can manage for 10-20 years without this fixed amount . As per my father i should invest in shortest duration and keep renewing it . But i feel that interest rate on nre fd is very gud at present but in future it might go down . should i go for short duration fd or long duration fd .

    2) assuming that the interest rate on nre fd remains same for next few years . i want to invest all my money on nre fd’s . Is it advisable to fix all money in nre fd ?will it give give gud returns as compared to other investment like mutual fund .

  82. tesh says:

    hi i am planning to move back to india for good,i am citizen in us with oci.i i invest all my holdings in nre a\c then do i have to pay any tax on my earnings on interest in us.eventhough i am not planning to come back to us.

  83. Hi Padma Bhushan,
    1. Your thought process is pretty correct. There is no issue for booking a long term FD. Infact I advocate a 10 year FD as the interest rates are on a downtrend and a long term FD will help in blocking interest rates.
    2. It is difficult for me to advise you on your investment strategy without knowing your background situation. For long term, mutual funds may end up giving a much better return.

  84. Tesh
    You should take an advice from US CPA. Once you return back to India, you may not be US Resident for US tax purposes. And non Residents for US may not be liable to pay taxes in USA.

  85. nina says:

    Hi,
    I had invested in icici prudential life time super mutual fund [current value around 5 lacs] in 2007 through my NRE account, Now i have left my job and have come back to india, I am currently jobless for 2 years now. I want to redeem my funds and i guess it will be put in my NRE account . I wanted to know if i can open a Fixed deposit in my NRE account using the money ? and will i be taxed ? . thanks

  86. Nina,
    Ideally you can’t open a NRE FD after being a resident. Hence you should convert the NRE account into a resident account after redeeming your funds.

  87. Practicia says:

    hi, you are doing awesome job answering so many question which really should be done by Indian banks but are apparently incompetent.
    Now my question is if I wire transfer money to lets say ICICI NRE account, do I need to specify that it is to be remitted in INR as it seems like some banks has limit of how much you can in one wire transfer if you are transferring as USD, no limit if you are are transferring as INR.

  88. Practicia
    If you are transferring funds to your NRE account,the funds shall be credited in INR only. Doesn’t matter if you send as USD or in INR.

  89. Anthony says:

    I am a OCI and have NRE Fd’s for 5 years (2012 to 2017). I have lived out of India for more than 182 days in 2012. From 2013, if I may have to live in India for more than 182 days, do I have to inform the bank and break my NRE fd’s, & move them to resident indian fd’s. I am over 60 years and can I get the interest rates for senior citizen resident fd’s. I plan to move my fd’s within the same bank (from NRE fd to resident fd’s).
    If on the other hand, I had read somewhere that I can still maintain my NRE fd’s, but will have to inform the bank & would attract tax on maturity of the fd’s. If so, would they tax my interest on the fd’s at the nro rate of 30% for all the 5 years, even though I have been out of the country for the 1st year ( 2012 to 2013).
    If I do not inform the bank about my move back to India and earn interest tax free, can they ask me to prove on maturity of my fd’s that I have been out of the country for more than 182 days in all the financial years. Also if the tax department finds out that I have been a resident indian and have not paid the tax on the fd’s, can they impose a heafty fine plus the taxes on the nre fd’s.
    I would greatly appreciate your advice. Thanks

  90. Anthony,
    I appreciate your dilemma. Unfortunately I don’t find a clarity in Income Tax act on the treatment of NRE interest once you become resident. Banks would generally give you two options. First is to convert the NRE into Resident FDs and attract normal tax rates as per the resident tax slabs. Or they will ask you disclose this interest in your tax returns. I don’t think that the bank would charge TDS on NRE FDs if you don’t convert them into resident FDs.

    If you are planning to stay temporarily in India and then move out again, perhaps you may want to avoid the hassle of converting your NRE FDs into Resident FDs.

  91. I am a marine engineer and I am converting all my payments directly to FCNR for one year term. Actually, I am saving dollars so that I can use them in my higher education (MBA). I have one doubt, would I be able to make payment to USA college directly from my FCNR money without having to undergo the exchange rate fee? Plus, the banker said, interest on FCNR will attract TDS. Is it true?

    Best regards,
    Gaurav

  92. Gaurav,
    Your banker needs some tax education. Interest on FCNR is tax free and hence doesn’t attract TDS in India. You can remit funds from FCNR outside India without worrying about exchange rates as FNCR is maintained in foreign currency. You may incur some remittance charges in the range of Rs. 1000- 1500, but zero exchange fees.
    Alternatively you could convert your $s into INR in NRE and book them into 1-3 year Fixed deposits. But these would be subject to exchange rate fluctuations.

  93. Gaurav says:

    Wow, thanks for your quick answer! You guys are awesome!!! One more doubt, after one year term, can I take all dollars in cash? Or they will automatically convert all dollars to INR after the FCNR matures and save them in my NRE? I am sorry, I have no knowledge about banking operations.

  94. Pleasure to help you Gaurav.

    Generally if you don’t provide any specific instructions, banks would create another FCNR FD for the same duration as the original FD. They won’t transfer the proceeds into INR denominated NRE account.

  95. rakesh says:

    hi. m RAKESH. I have nre FD and got interest around 250000. bank deducted interest around 50000. I want to file it for refund. up to 200000 lac tax exempn. remaining 50000 I can get exemption by lic policy. while filing itr I will show it under 80c. but how to show proof to IT dept.

  96. Balaji Srinivasan says:

    Dear sir,
    First, I would like to thank you for the useful post. I have read posts and it was really interesting to know the current tax structures in India. I have some queries regarding the same.
    Since 4 years am living in Germany, and I am holding the savings account in India and I have made some fixed deposits. After the maturity of the same, they have deducted TDS and I enquired the branch manager regarding the same and mentioned me to convert the fixed deposit accounts into NRE and hold an NRO savings account. Is it possible to collect back the TDS money? Thanks in advance.
    My question follows below
    1. Am I not allowed to hold an savings account in India, where I could send foreign currencies to my savings account in India? Do I have to pay tax for the money flow to the savings account?
    2. Is NRO savings account and the normal savings account are different? Are there having major difference?
    3. I am holding NRE account and savings account in corporation bank, and few people have told me, you should not have both the accounts in the same branch. Does it influence me in my taxation? Or should I have to convert the normal savings account into NRO account?
    I am very thankful for your answer.

  97. Balaji,
    By the sound of it, your banking affairs in India have got really mixed. First of all please read my article Types of Non Resident Bank Accounts – NRE, NRO & FCNR for details on all types of NRI bank accounts.

    1. You are not allowed to hold a resident saving account after becoming NRI. You can open a NRO account which has same features like a saving account except that interest on NRO attracts flat 30% TDS. You can also send Foreign currency into this account;
    2. Ans in 1
    3. If you hold NRE and saving in one account, the bank can easily track that and force you to close the saving account. You should ideally convert your saving account into NRO.

    TDS on income can be recovered by filing a return and showing that you have zero tax liability in India. We do it all the time for our clients.

  98. j.k.gupta says:

    My son is working in Saudi and having a NRE account in State Bank of Hyderabad . Though this account he is investing the funds in FDR in the same bank. I would like to know whether the interest earned on these FDR attract the TDS in India, jkgupta

  99. No NRE FDR interest does not attract TDS.

  100. Spicy says:

    With Rupee at 60 do you anticipate Fd rates going higher or lower in next 3 months

    Amazing how these banks screw around with various toxic products like nre fds etc

    Banks will win always

  101. Sudhakar says:

    If I open a NRE term deposit while I am an NRI for say 1 year and If I become resident Indian say in the 4th quarter, what would be the tax implication on the interest earned?

    1. Is the complete interest earned for 1 year even after I become resident Indian is tax free? or
    2. Is the complete interest earned for 1 year taxable?
    3. If not, how is the tax on the interest income calculated on this scenario?

  102. Gul says:

    If you are in a transition period of Resident but not Ordinary Resident that is for two years.
    Question .1 ) Is the NRE fixed deposit taxable of these two years when the status is Resident but not Ordinary Resident ?
    Question .2 ) Can an individual maintain a NRE account in this transition period of Resident but not Ordinary Resident ?

    It will be of great help if someone could assist!

  103. 1) The NRE interest exemption under the Act is provided under Section 10(4). It says that interest on NRE accounts is tax free only for person who is resident outside India as per the definition under section 2 of Foreign Exchange Management Act (FEMA). It has no relationship with Income Tax’s act of Not Ordinary Resident. Hence NRE FD interest will be taxable from the date you become resident in India.
    2) Ideally you can not maintain your NRE account after becoming a resident.

    Under FEMA, a person resident outside India means a person who is not resident in India. The definition of person resident in India is :
    “person resident in India” means –
    (i) a citizen of India, who has, at any time after the 25th day of March, 1947, been staying in India but does not include a citizen of India who has gone out of, or stays outside, India, in either case-
    (a) for or on taking up employment outside India, or
    (b) for carrying on outside India a business or vocation outside India, or
    (c) for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;
    (ii) a citizen of India, who having ceased by virtue of paragraph (a) or paragraph (b) or paragraph (c) of sub-clause (I) to be resident in India, returns to, or stays in, India, in either case –
    (a) for or on taking up employment in India, or
    (b) for carrying on in India a business or vocation in India, or
    (c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period;
    (iii) a person, not being a citizen of India, who has come to, or stays in, India, in either case –
    (a) for or on taking up employment in India, or
    (b) for carrying on in India a business or vocation in India, or
    (c) for staying with his or her spouse, such spouse being a person resident in India, or
    (d) for any other purposes, in such circumstances as would indicate his intention to stay in India for an uncertain period;
    (iv) a citizen of India, who, not having stayed in India at any time after the 25th day of March, 1947, comes to India for any of the purposes referred to in paragraphs (a), (b) and (c) of sub-clause (iii) or for the purpose and in the circumstances referred to in paragraph (d) of that sub-clause or having come to India stays in India for any such purpose and in such circumstances.

  104. Hey Spicy,
    I don’t really get your comment around bank’s screwing with toxic products. NRE FDs are not a toxic product and banks are not screwing around at all.
    If you have an inhibition with Bank’s winning, perhaps you shouldn’t trust them and create your own venture.
    I don’t believe that FD rates will go any higher as of now. Infact they should head lower if the Rupee goes within sub 55 range.

  105. SCK says:

    While investing you must consider the exchange rate fluctuations. If at the time of investment the exchange rate is 53Rs to a $ and at redemption it stays at 60 Rs to a $ (as is now) then you already have lost more than 10%. So the 9.5% interest rate plus any taxes on the interest generated would wipe out your gain.

    And the amount is not covered by any fiduciary organizations and if the bank you invest in fails then you will lose the money.

  106. Gul says:

    Thank you very much for your assistant. Need your further advise.

    If one has been a NRI for 11 years and he plans to be a resident in the 12th financial year.

    Question No.1) Being a resident, is it a particular date on which you resign from your foreign company and return to India or is it considered as a whole financial year in which you have not completed 183 days outside the country in that 12th financial year ?

    Question No.2) Do you have to pay tax on NRE FD for the whole 12th financial year or from the date you have resigned and come to India.

    Say you have resigned in December. So do you have to pay tax on NRE FD interest from December to 31-March-XXXX or pay tax for the complete 12 financial year where you have not finished 183 days outside the country?

    Question No.3) I have heard there is a flat tax compensation for the NRI’s. The tax on interest payable on the Money earned abroad is flat 20% after you become a resident, even if you are in a highest tax bracket of 30 %.

    Is this below statement true from one of the web-sights?

    Concessional Tax treatment for Foreign exchange assets:
    NRE/FCNR deposits with banks in India and investments in Government securities and company debentures out of foreign exchange funds would be eligible for a flat income tax of 20% on their income after permanent return of the NRI. The concession will be available till maturity of these investments.

    Regards.

  107. chris says:

    hello.
    i am thinking to open a 20 lacs NRE FD with SBI..currently i live in US.say if they give me at a rate of 9.25% and i lock it for 10yrs..will the 9.25% be there throughout this period of 10 yrs no matter what happens to the economy..i am doing this just to create a regular income for my mom in india.

  108. Chris
    That’s correct. The interest rate will remain unchanged. However the interest rates have now come down to around 8.5% now for 10 year FD.

  109. Karthik says:

    Dear Banyan Financial Advisors,
    First of all appreciate a good article as well as the effort you are taking to answer all these questions clearly. Fantastic job !
    I read your responses to all the questions and observed that you seem to take a different stand on taxation of NRE fixed deposits after returning to India. I am referring to your response to Sudhakar’s question where you clearly and confidently say that it is taxable from the date the NRE returns to India. When the same question was asked earlier by few other people, you had noted that it should not be taxed. But you had also mentioned earlier that there is no clarity on this subject. Should I assume that you now have found new information and you are now taking a different stand based on that ? Please clarify. Thanks

  110. chris says:

    thanks .one more question..
    is it still possible to transfer the funds out of NRE acct to my other savings or my mom savings acct wth other banks like icici.
    basically. i want to go for a monthly interest payout and want to get this transferred to my mom icici acct every month.

  111. Karthik,
    Apologies for the confusion. My later stance in response to Sudhakar’s query is correct. I arrived at this stance after detailed study of Income Tax Rules.

  112. Chris,
    It is possible to do what you are aiming at. You can setup a Standing Instruction to transfer the funds to your mom’s account. Alternatively, you can add your Mom as an authority holder so that she can operate your NRE account on your behalf.

  113. kotla says:

    sir,
    i am an NRI and i always remit funds to my NRO and resident savings acct in india.
    i have bought few residential property out of it..
    as an NRI,will i still be on tax audit ……..or is it only for residents
    in other sense, if i make lump sum payments towards my property purchase will there be any tax complications.
    i do make quite a good rental income out of these properties in india and declare them here in my country of living.but wanted to know if there is any kind of paperwork that i had to do back in india for these incomes.

  114. nathan says:

    sir,
    i bought a flat in india back in 2003 for 15 lacs…and sold it in 2010 for 30 lacs..
    i am an NRI…now,is there any tax that i am liable for this 15lakh gain.
    i never paid anything like tax as such so far for this, as i was looking for a guidance on that part..but reported that income back here in my country of living…….like to know if there is any tax that i need to pay on the above sale gain.

  115. Hey Kotla,
    1. Remitting to NRO doesn’t create any complication;
    2. You are not subject to tax audit if you get income from house properties.
    3. Lump sum payments are not a problem. There should be no complications.
    4. If you receive a lot of rental income, you should file a tax return every year to ensure that you don’t have any tax liabilities in India. We help a lot of our NRI clients on this. You are not mandated for a return if your income is within 2 lacs a year. But if your income is over 2 lacs, you need to do tax planning and pay taxes.

  116. Nathan,
    Definitely you are liable for taxation in India as you have a capital gain on sale of your flat. I do appreciate that you have paid taxes in your country of residence, but since you have sold your flat in India, you are liable to pay taxes on income accrued in India even if you are a NRI. Ideal steps were :
    1. Declare income in India.
    2. Pay taxes in India
    3. Declare income in your Foreign country and compute taxes payable in foreign country
    4. Claim taxes paid in India out of your tax liability in Foreign country under the DTAA (Double Taxation Avoidance Treaty)

  117. samya says:

    sir,

    in your below statement to one of the posts above

    “TDS on income can be recovered by filing a return and showing that you have zero tax liability in India. We do it all the time for our clients.”

    kindly clarify on the above –

    – can TDS be recovered for someone who is an NRI but hold a resident savings acconts…
    or
    – can TDS be recovered after converting the resident savings to NRO account –
    or
    – can TDS be recovered from NRO account if the interest earned is less than 2 laks per annum

    i am an NRI living in US for the last 5 years and had been remiting funds to my SBI NRO acct all these years…in each year statement, i see TDS deducted on the NRO savings accrued..but didnt know this clause of 2laksh exemption,where they could be recovered.

    so,though they might be very minimal amount ,can i go and recover all those TDS for the last 5 years by filing for it.

    thanks for your advise.

  118. Samya,
    Yes you can claim refunds for all those years. You can file for a refund irrespective of the type of bank account you are holding.

  119. SBK says:

    We are US Citizens with OCI card. Do we pay tax on interest NRE deposits in US only when we repatriate tax income or do we pay tax even if we do not repatriate funds back to US?

  120. SBK,
    I would suggest you to consult a CPA in US. My understanding says that you need to disclose the interest even if you don’t repatriate the funds back to US.

  121. Saleem Shaikh says:

    I was working in Dubai n have a NRE A/C but now i have returned to India 3 yrs back n I was not aware that i have to inform the bank once u return.
    Now can i still maintain my NRE A/C or have to close the A/C
    Secondly what taxes are applicable to me n do i have to pay any penalty?

  122. Saleem,
    You can inform the bank and they will either close it (if you want) or convert it into Resident account.
    No penalty may be levied by the bank. However, you are liable for paying taxes on the interest on NRE account after becoming a resident.

  123. Kevin says:

    Hi everyone at Banyan Financial Advisors,

    Your responses and clarifications have been fantastic.

    However, with reference to your earlier statement that ,”The NRE interest exemption under the Act is provided under Section 10(4). It says that interest on NRE accounts is tax free only for person who is resident outside India as per the definition under section 2 of Foreign Exchange Management Act (FEMA). It has no relationship with Income Tax’s act of Not Ordinary Resident. Hence NRE FD interest will be taxable from the date you become resident in India.”

    I would like to know in that case what would be the tax slab, as i am earning interest totaling in the range of 15 lacs per year in denominations of 45,000 per FD.

  124. Kevin,
    If a NRI becomes resident, Interest totalling to Rs. 15 lacs per year will fall under 30% tax slab in following manner :
    0-2 lacs – no tax, 2-5 lacs – 10%, 5-10 lacs – 20%, 10 lacs plus – 30%.

  125. Kevin says:

    Hi again,

    Thank you very much for your prompt reply.

    In that case, I would have to convert my NRE FDs into NRO FDs once i settle back to India.

    Also, some of my FDs are locked in as full amount on maturity and some are paying me interest quarterly. From a purely tax saving perspective, which type of FDs would you think would give me maximum yield (considering I do not require the funds in the interim) and considering the 30% slab. (I am assuming here that the Tax on interest for full maturity FDs shall be paid only once at the time of maturity).

    I am sorry if this sounds a little complicated. I must admit you are helping us out a lot here.

    Thanks in advance.

    Kevin

  126. Kevin,
    You have two options (not my suggestions) :
    1. Convert your NRE Deposits into Resident deposits – if the banks don’t allow it then you have Option 2
    2. Option 2 – Let your NRE deposits continue as it is. Declare the interest in your tax returns on an annual basis.

    No FD will be tax efficient. The plus side of NRE FDs is that it won’t attract TDS and hence you can manage your taxes better and structure the interest payment usage towards other investments. Tax on resident FDs need to be paid annually as income accrues every year.

  127. sandeep says:

    HI,

    I have a query. Is the NRE FD’s are 100% tax exempted ? or we need to give any forms to get it tax exempted ? I have NRe account and i live in dubai.

    Thanks,
    sandeep

  128. Rahul says:

    Thanks, I have what I hope is a fairly simple question: I live in the UK and invest in NRE FDs in India. In the UK, worldwide income is not taxable unless one is domiciled (which I am not). My question is, will I have to pay to tax on either the principal or interest if I remit the money back to UK. What happens if the rupee appreciates?

    For example, if I put £1000 into a NRE FD and after 5 years remit back £1000 plus interest, will I have to pay tax on either the interst or the principal? Further, assuming I dont have to pay interest on the principal, what happens if I put £1000 in FD but remitted back pound £1,100 as a result of rupee appreciation?

  129. Sandeep,
    NRE FDs are tax exempted by default. You don’t need to do any thing to get the exemption.

  130. Rahul,
    Your question is far from simple :)

    I am well aware of UK tax laws and in my experience the Domicile concept is widely not clear amongst the tax payer. Unless you have earnings outside UK around a crore plus, then it will not make sense to go for domicile outside UK as you will have to pay an annual tax charge of £30K.

    Hence please revisit your personal UK tax situation and ask further questions if needed. The following HMRC Document may help you (http://www.hmrc.gov.uk/cnr/hmrc6.pdf).

  131. merlyn says:

    Dear Banyan Financial Advisor,
    I arrived from the gulf last year and I have renewed my NRE FD but not informed the bank as i am likely to move to canada within 9months and waiting for my paper work to be done.
    Is it advisable to convert my NRE FD to local account here and will i be taxed.

  132. Dhaval says:

    Hi, I would be obliged if the following query us answered:
    I am an NRI in UK and would like to invest into NRE FD as a substitute for pension. My calculations show that even considering an adverse exchange rate, the NRE FD interest on GBP converted to Rs would fetch higher returns by cumulative compound interest (with annual deposits) than a employer contributed pension scheme. what I am doubtful about is whether the tax regimen in UK is likely to annul the advantage of NRE FD?

  133. Merlyn,
    It appears that you have come to India and have definite plans to leave India shortly. In that case you may be covered under the definition of non resident in FEMA. Please refer to the definition of a resident as per FEMA (specially to clause ii). In such a case you may be allowed to continue with the NRE FDs and enjoy the tax benefits. However, consult your relationship manager.

    “person resident in India” means –
    (i) a citizen of India, who has, at any time after the 25th day of March, 1947, been staying in India but does not include a citizen of India who has gone out of, or stays outside, India, in either case-
    (a) for or on taking up employment outside India, or
    (b) for carrying on outside India a business or vocation outside India, or
    (c) for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;
    (ii) a citizen of India, who having ceased by virtue of paragraph (a) or paragraph (b) or paragraph (c) of sub-clause (I) to be resident in India, returns to, or stays in, India, in either case –
    (a) for or on taking up employment in India, or
    (b) for carrying on in India a business or vocation in India, or

  134. Even if NRE FDs are tax free in India, they should be taxable in UK as you would be resident in UK and hence your global incomes should be declared and taxable in UK. Hence just keep that in mind while planning your retirement investments.

  135. Dev Sharma says:

    Hi
    1)I want to know as a NRI can I buy 10 year tax free infrstructure bonds in India.
    2)Before I return if I put all my savings in 10 year NRE FD with monthly interest pay out,will i be paying tax on my monthly income generated out of NRE FD when I settleback in India.
    If yes can you suggest a taxfree monthly income option for returning NRI.

  136. Prema Menon says:

    Hi! My name is Prema Menon, Based on advise by a relative, I opened NRE Account in ICICI Bank, Cochin. I am a resident in Malaysia. I opened the account on 5th Jan 2012 in 4 tranches (total amt deposited about INR 19 lakhs). Period (990 days) at 9.25% interest per year. The monies will be matured in September 2014. I need your advice on the following queries:
    * When we put the money – exchange rate 1USD = INR53. As of today (4 Sept 2013) exchange rate is about INR68.00 to 1USD. To me at the current rate, I think the value of deposit has decreased quite abit, am I right?
    * Not sure if its advisable to renew our FD when the time comes. Your advise?
    * Repatriate the monies totally back to Malaysia?
    * Also this relative advised me to put INR5 lakhs in ICICI Pru Pinnacle Super LP by
    Prudential for 5 year period – maturity 5th Jan 2016. I had told him that I cannot put 5lakhs every year. His advise no need to put every year. So now my money is ‘stuck’ for 5 years under this scheme. Not sure if I will lose the entire 5lakhs as I have not been depositing every year. Would appreciate a clear picture of the (rough) amount I will get back
    in 2016.
    My main concern is the reduction in value of INR…Hope my efforts are not in vain investing in NRE FD…
    Thanks
    Prema Menon
    email: premam93@gmail.com

  137. Dev,
    1) Yes, except for NRIs based out of USA
    2) If you return back to India, your interest in NRE FDs will be taxable in India. Please go through the queries in this blog where this is answered in detail.

    We have a few tax planning options for returning NRIs. You can contact us at info@banyanfa.com

  138. Rob says:

    Hello Banyan Financial Advisors,
    I hold a NRE, NRO & NRE FD in the same bank. I have locked in the NRE FD for 5 years because of no TDS on interest.
    But I will be a resident long before the NRE FD matures. When I become a resident, I have either close or convert my NRE account.
    1.Is it true that if you close your NRE account, the NRE FD too has to be prematurely closed ??
    2.As I understand you cannot keep your NRE account dormant for long, as the bank can then temporarily “deactivate” it, and ask you to do some transactions to “activate” it again..
    3.Secondly, isn’t it required for a NRI to declare within 2years (not sure) to the bank, that he/she is resident now. ?

    In the above scenarios, which is the best option with regards to the NRE FD, so as not to attract any TDS on it.
    Rgds, Rob

  139. Joao says:

    Dear Sir, my wife from India has a NRE FD account, 3 year – 9% Being a non-Indian, interest in my own country offers no more than 3.5% interest on a FD. Would it be wise to put an x amount on her NRE FD account. This would mean deposit of EUR. What would be the risks as I do not really get the story on the currency fluctuations. Thank you for some explanation.

  140. Rob,
    This blog has over 70 queries answered related to similar questions. Ideally you would have to inform your bank once you become a resident. I am not aware of any time limits by when you need to inform. NRE account is for NRIs as per FEMA. And the moment you are not a NRI, you should ideally not be holding a NRE account. You have two angles :
    1. Tax angle – which you can remediate by declaring NRE FD interest in your return of income
    2. FEMA angle – where you are maintaining NRI accounts even after becoming a resident. I would suggest you to talk to your bank and ask for options. One of the bank RM told me that you could avoid transacting in NRE account or have one small withdrawal once in 6 months to avoid making it dormant. Once your FD matures, you can withdraw the funds and close the account.

  141. Joao,
    While NRE FDs give more interest than your local account in foreign country, it is subject to exchange fluctuations. Simply it means, if you invested $100 when $ was 40, you would have invested Rs. 4000. Lets say at maturity you get Rs. 5K. However if the $ is now Rs. 60, you will get Rs. 5,000/60 = $83. So not only your entire gains were eaten by currency movements, you also now have a big loss on the capital which you have invested initially.

  142. Rob says:

    Hello Banyan Financial Advisors,
    Apologies if I was being repetitive. However, I did go thru the comments before posting.
    The query was:- Is it necessary to have a NRE account at the time of maturity of NRE FD.
    As per the manager of BOB, the NRE account can be closed, and the NRE FD can continue until maturity. Upon maturity the proceeds can be deposited into a resident account.
    But then another version says, if NRE account is closed, the NRE FD too in that bank needs to be closed. And hence my confused state. I would rather prefer to close my NRE account, once I am not an NRI just to avoid any future queries. I hear what you say, is just withdraw some amt every 6 months. This can be done for a few months to a year. But how about 3 years. Is that okay? Can IT question me on why my NRE ac is not closed. Ofcourse there will be no deposits done.
    Rob.

  143. Rob,
    To get an answer to exactly this question – I am currently in the process of writing a detailed article which shall be published shortly.

    Regarding involvement of IT, Income tax officer should be fine as long as you are declaring the interest every year in your tax returns once you become a resident. The issue is with FEMA / RBI where there is not sufficient clarity as to what should NRI do with their NRE FDs once they become Residents.

  144. Krish says:

    Hi everyone at Banyan Financial Advisors,

    A very useful and a nice article. Being a NRI, want to park my NRE funds for short term (less than a year) . It could be for 3 months or 6 months but would not cross one year.

    Does any options are available in India to park NRE funds for ultra-short term to earn tax free interest over and above savings interest rate of 4%. As you know Banks requires at least a year of deposit to give the interest?.

    I have one option to go through MF debt funds. However they deduct TDS at max rate. So is it possible to earn more than 4%, no TDS or Tax liability for a period less than a year on NRE funds.

    Pls do let me know if you come across any such options.

  145. Krish,
    Unfortunately before the start of this tax year, there were options, but now all such options are closed. You could choose to invest in Debt money market funds and claim the TDS via tax returns.

    Other option is to open an account in any of the bank which gives 7% plus interest on the NRE account irrespective of the deposit (e.g. Yes Bank).

  146. MR says:

    Dear Banyan FAs, Please guide me if there are NRE FDs available with tenures of 15yr and 20yrs as i have seen banks offering “5 yrs and above”? I wish to have NRE FDs longer than the current 10yr period. Thank you.

  147. Dear MR
    Banks in India do not offer Fixed Deposits beyond 10 years.

  148. aseem says:

    1) Is the interest on NRE FD taxed after maturity of the FD or right from the day one ceases to be an NRI?
    2) What are the options of avoiding tax on the interest earned on NRE FDs after becoming a resident midway?

  149. Bala says:

    Hello Sir, I am working in offshore industry at Malaysia (35 days work in Malaysia & 35 days at home, India). I posses SBI NRE account from September 2013, my company doesn’t deduct any tax, fixed salary. As my account is NRE, do I still need to file tax ? what if I invest in NRE FD ? for last fin year 12-13 I did file my tax returns, as I was working in India.

    Thanks.

  150. Panks says:

    Dear Sir, First I would like to thank you a really good article and even more for the clarification to the queries. This is indeed one of the better articles I have read about NRE fixed deposits. Since the Nre rates are so lucrative at the moment, I have invested in NRE fds. I have the following queries, if you could spare some time to answer:

    1. If you repatriate only the principle without intrest back to your residing country, would there be any tax liability in your residing country. I assume no but would like you to confirm.

    2. Could we transfer the interest to NRO and pay @lower rate tax on income as per DTAA and later repartriate after completing15 CA/15 CB?

    Thanks a lot in advance.

  151. Aseem,
    1) Interest is taxed on a yearly basis after one ceases to be NRI
    2) Practically no options. You may want to choose to dissolve your NRE FDs and invest them in other tax efficient instruments.

  152. Bala,
    Any income on NRE account is tax free and you do not need to pay any tax in India.

  153. Rob Farro says:

    Midway, during the tenure of the NRE FD, if one becomes a resident, as per guidelines, legally, he has to declare that he is no longer a NRI. He can either opt to close his NRE account, or convert it to a resident account.
    However, the NRE FD, since it is a contract which was entered into by the investor when he was a NRI, continues until maturity with no tax on the full proceeds, which can be deposited in his resident account, as he would have closed/converted his NRE accounts.

    Dear Banyan Fin Advisors, please correct me, if wrong. Because several banks give different answers. The above I checked with a leading PSU bank. However another large private bank says, once you are a resident, you have to close the NRE FD too, irrespective of its maturity period. They mention the maturity proceeds will have to go to a NRE account alone.

  154. Nikhil says:

    Dear Banyan FA,
    I highly appreciate your patience and promptness in replying to the concerns of so many of us! Your replies are crucial!
    I want to deposit to my Recurring Deposit using funds in my NRE account (SBI NRE). To do that I plan to remit the necessary amount into my NRE a/c every month (say using wire transfer). My questions are:
    1) Upon maturity, can I transfer Principle and Interest back to NRE account, i.e. the same source account? (NRE does not accept local rupee deposits)
    2) Can I repatriate funds from NRE account to my US account? What forms and documents need to be filled?
    Thank you!

  155. Rob
    You are correct. The banks have really messed it up. I have personally clarified it with the banks. Ideally the NRE FDs should be converted into Resident FDs on the same terms as of NRE FDs. However the systems of the banks are not geared to handle this complication. The customer should not bear the brunt of ineffective systems of the banks. In such a situation, you could start declaring the nre FD interest in your India tax returns after you become resident. And unless the bank does not honour the terms of NRE FDs, it makes no practical sense to prematurely terminate or close the NRE account with the bank.

  156. Nikhil
    Thanks for your note.

    1) you can very well do a NRE RD. The funds on maturity will get credited to your linked NRE account.
    2) you are free to repatriate the funds outside India. Just contact your respective manager in SBI and they will get this coordinated for you.

  157. Swapan Kumar Maitra says:

    I am a NRE account holder. If I put some money to NRE term deposit for longer term (More than 5 years)in a year when I maintained my NRE status and then after 2 years I leave my job or I am do not maintain my NRE status any more. Then what will happen to my NRE term deposits after 2 years? will they became ordinary term deposits or it will continue as nre term deposits till their matuarity (term finish)? Please reply. Thanks.

  158. Nikhil says:

    Thank you for the clarification BFA.

  159. Rob says:

    Ban Fin Adv,
    Thanks. Another mention from this private bank is that should you become a resident in the middle of your NRE-FD tenure, they will convert that NRE-FD into a resident FD from the date you declare as resident, but at the same ROI until its maturity date. Now my question to them was: “Yes, its great that you will give the same ROI, however, will you charge TDS on the interest component? And the answer was Yes, as now it is a resident FD.”
    The whole purpose of NRE-FD is that there is no TDS on the interest.

    BFA, I agree with you when you say “Unless the bank does not honour the terms of NRE FDs, it makes no practical sense to prematurely terminate or close the NRE account with the bank.”
    Well, it is fine not to close for 6 to 12 months after being resident. But how about when you still have a good 3 years for maturity. My concern is questions from IT. Will there be any? Secondly the NRE account will be dormant. Ofcourse one can withdraw small amts every 3 to 4 months or so to keep it active.
    Somehow I feel this is a grey area with diff banks having diff answers on the way they treat NRE FDs, when one becomes a resident.

  160. Hi Swapan,

    Your query is exactly the same as asked by Rob Farro. You can refer to the response in that query.

  161. Rob,
    The question around IT will come if you don’t pay tax on NRE account. I hope you will be fine from tax perspective if you disclose this income in your tax return.

    You can perhaps avoid your NRE account from being dormant by doing what you mentioned every 6 months. It is a grey area as the banks have not got their act together to resolve this problem. I am sure that they will face the issue sooner or later as they ended up releasing a product in the market without thinking it through.

  162. Manisha says:

    One of my assessee is NRI and invest his money as fixed deposit in nre bank account.
    He has nre account and nro account in india.
    Assessee has matures fd by transferring it to nro account and he gets gain of interest and exchage rate. now the question is whether exchange gain on fixed deposit are taxable or not?

  163. Manoj says:

    Siumple Question which I have been unable to find the answer to:
    I am RNOR status residing in India since 1 year.
    1. Can I continue to maintain the NRE account?
    2. Do I have to pay interest on NRE fixed deposits.?

  164. Manisha,
    We don’t understand what exchange rate gain you are referring to as both NRE and NRO FDs are in INR. Please could you further clarify your question.

  165. Manoj,
    For NRE FDs, you should be considered as a resident. Please refer to the queries below where I have clarified the treatment for residents.

  166. Manoj,
    For NRE FDs, you should be considered as a resident. Please refer to the queries below where I have clarified the treatment for residents.

  167. SRIRAM says:

    Hi Sir Very GoodEvening. Am fresh traveller to Forign Job. Finally i completed 6 months and i transferred 5 lakhs INR to My SBI NRE Savings Account. I am having Internet Banking facility also. Now i want to deposit as NRE Deposit for free tax purpose. How can i convert my amount to NRE Fixed Deposit? If Any Seperate Procedure to opening the NRE Fixed Deposit Account Like NRE SB Account? I am Fresher. Guide Me Please.

  168. Hi Sriram,
    NRE FD is very similar to a normal FD. You should have this option in your online banking portal of SBI to open a NRE FD.

  169. Hari tanna says:

    Hi.if you originally sent money in NRO AC,invested in residential property,then sold it ,converted proceeds to NRE AC and now parked in NRE FD.is the interest exempt from India taxes?status is non resident PIO.do you need to file a Tax Return being PAN registered?

  170. Ritesh says:

    Hi BFA

    I have shifted to US in May 2013 and before that I converted my savings into a NRE Cumulative FD for 5 years. My tax consultant in India told me that I wont be liable to pay tax in US on the FDs till maturity. Is that true because I see some conflicting responses above and am a bit confused?

  171. Mujeeb Ansari says:

    I have NRE FD account with bank maturing in March 2014. My NRE status finished in December 2013. How long I can continue this NRE FD account with the bank? Bank is very cooperative with me and not forcing me to transfer the funds to ordinary account. Please advise wether I should continue with NRE FD with the cooperation of bank.?

  172. Digant Shah says:

    Taking the NRE payouts and then putting in to mutual funds in India would make the money convert to NRO.. right??

  173. Hi Hari,
    Interest on NRE FDs is tax free in India. You don’t need to file a return to get a tax-free status on NRE FDs.

  174. Ritesh,
    I have different views from your tax consultant. NRE FDs should be taxed on an annual basis irrespective of its maturity. IRS rules are pretty clear on it. Kindly consult a CPA for more details on it. The rule is :
    1. If FD is less than 1 year, then include interest income on maturity;
    2. If it is more than 1 year, it is considered as “Original Issue Discount” and interest should be taxable on an accrual basis, i.e. every year.
    You can confirm this yourself on the link http://www.irs.gov/publications/p17/ch07.html#en_US_2013_publink1000171525

  175. Hi Mujeeb,
    If your NRE FDs are maturing in March 2014, then you can continue to hold them till that date.However avoid renewing the FDs as NRE FDs after this date.

  176. Parag Shetty says:

    Hi, I am an NRI living outsided India for more than 10 years. I have NRO and NRE accounts with bank in India and have booked FDs in those accounts. If i convert to a foreign nationality and get an OCI/PIO card, can i continue with the NRO and NRE accounts ? Also, will my bank require me to break the FDs that i have already booked ? Also, as an OCI/PIO holder, would the interest in NRE account be still tax-free and freely repatriable overseas?

  177. Ajay says:

    Congratulations on a great site! I have retired after 12 years service in Dubai and moved permanently to India in December 2013. My status for the FY 2013-14 is NR. I have not yet converted by bank account status from NRE to RI. I now plan to invest in a 3 year NRE FD before 31st March. Will the interest be taxable in India? Should I change the status of my bank account? Will such change affect taxability?

  178. Hi Parag,
    NRE / NRO FDs can be continued to be held even after you change your nationality. It is associated with your NRI rights which includes Person of Indian Origin. Interest on NRE will remain tax-free and freely repatriable.

  179. Ajay,
    Once you are resident in India, the interest in NRE account will be taxable. While the bank will not charge any tax, you will be obliged to declare this income in your tax returns.
    Ideally you should change the status of your bank account. With the change in status, the interest on bank account will be taxed like normal resident saving account interest.

  180. Chris says:

    I was born in India, but have settled in US for the past 25 year. I have a IRA for $80.000. Can I invest that in Monthly Interest saving accounts? I’m think of settling in India permanently and looking to have monthly Interest payout on investment of my money.

    Chris

  181. Chris,
    I am assuming you meant USD 80K. If you planning to settle permanently in India, then the money can be gainfully invested in multiple options based upon your risk appetite and tax liabilities in US & India. Not a simple discussion over this board. But you won’t be able to use NRE FDs as an option as they are available only for NRIs.

  182. Shri says:

    Congratulations for running such a wonderful site full of information.

    I am an NRI and have my NRE and NRO accounts. I have multiple NRE FDs for long term.
    My question is if I go back to india as australian citizen and with india OCI , can I continue to retain my NRE accounts and FDs (tax free) as long as i live there in india (even if I will start working in india after my return)

    Pls enlighten.
    Regards
    Shri

  183. Shri,
    Thanks for your appreciation.

    Your query has been responded in the series of questions in this blog. To summarise, NRE (saving + FD) interest becomes taxable once you become an Indian resident and you would need to disclose them in your tax returns once you are back in India.

  184. Jerry says:

    Hi My name is Jerry Raj from Malaysia. I just got my PIO approved and planned to place some cash in India FD. How shall i go about it? Do I need go to India or can i do it from here? Thanks

  185. Jerry
    You may be able to get that sorted from Malaysia without travelling. Even better if you have a branch of any Indian bank in your city. We can assist you with the process for a small consulting fees. You may contact us via our contact us page of you need any help in this regards.

  186. Ashish says:

    Firslty appreciatble and knowledgable forum, hence will try my best not to repeat the same questions

    I am Ashish , and i will return to India in Sep-14, after my secondment in Germany (total stay 1.8 years). Would highly appreciate your advise on following questions

    I have NRE account with HDFC Bank
    1. By Indian law within how many days, after entry to India, the NRE account is required to be converted to savings account. Last i know 6 months window is there but not sure if this is current.
    2. While converting the NRE account to savings account, any FDs (opened during NRE status) will continue with same rate of interest interest till maturity (Mar-15 and Jun-15)
    3. I also have FDs opened in this month also. Could you advise if i can continue till maturity till next one year.

    PPF account in India
    During one of visit to India i got a chance to open a new PPF aacount (SBI Bank)- does this account qualify for tax deduction ?

    regards, Ashish

  187. Ashish
    The banks do not enforce the closure of NRE account strictly. If you choose to do so, you may to forced to close all NRE FDs prematurely. I believe the better option is to pay tax on your NRE FDs once you are an Indian resident and avoid any further transactions via your NRE account.
    2. You may not get same interest rate. The prevailing interest rates will be applicable.
    3. Answered above.

    Ppf account does qualify for the tax rebates of upto Rs. 1 lac taxable income per year under section 80C. You can read our article on PPF on this blog site as well to get detailed understanding on it.

  188. DevDil says:

    Hi

    There are some excellent replies from you on this post. Really appreciate the work you are doing here to help NRIs.

    I am a bit confused at the moment. One of your earlier post in 2012 i think said you would not need to declare your NRE Interest Income in the tax if your residence status changes. But now in your latest reply to Ashish on 20 June 2014 you have suggested that it is better to pay tax on NRE FDs…What is correct? Should we declare the income earned from NRE interest when resident status changes. What is the exact law?

    Second question is that say if i am putting money in to 10 Years NRE FD while i am overseas (away from India). During these 10 years, there will be no regular (annual) income generated in the form of NRE FD Interest because i am not opting for Quarterly or Annual interest option. Now after 10 years i may be a resident of India. I in fact will be a resident of India after 2 years from today. Now what will happen after 10 years when i get the maturity amount back in my NRE account? Should i be paying tax on that amount? I am reasonably sure that there is no need to break my NRE FD after 2 years but not sure what is my tax liability after 10 years? Or will there be any on going liability even if i am not earning income on Annual basis?

    Please reply as soon as you can as i am looking to transfer some funds soon. Answer to my questions will confirm if i should transfer or not.

    Thanks

  189. Sanjay says:

    Excellent site and valuable Q&A.

    I am an NRI with a OCI status and have NRE and NRO accounts with ICICI Bank. I have purchased a property and am paying for it in installments since 3 years and will continue to pay for another year approximately. I transfer funds from my US bank account into my NRE account and write a check out of the NRE account for the property installment.

    Question: When making the installment payment do I have to deduct the TDS portion and pay the tax to IRS? Or since this is an installment payment towards the purchase of the house TDS does not apply?

    Also, my local relative has purchased a flat as well and do they have to deduct TDS and pay the tax along with their tax return?

    Thanks in advance for your response.
    Sanjay

  190. Hi Devdil
    Apologies for the confusion, however once you become a resident, NRE FDs become taxable. You should disclose this interest amount in your tax returns on an annual basis after you become a resident in India.

    If your FD is having interest on a cumulative basis, then you should disclose the interest on an annual basis. The bank can provide you an interest accrued statement. The interest accrued for the year when you are a resident in India should be disclosed in your tax returns and not as a lump sum on maturity. I hope this clarifies your doubt’s.

  191. Sanjay,
    You do not have to deduct TDS for the payment of your loan installments.

    TDS is paid on the value of the property at the time of registering it in India (before paying for stamp duty). This tax needs to be submitted to Indian Tax Authorities and not IRS. TDS is required to be deducted @ 1% if the value of the property is over 50 lacs.

  192. Ramaprasasd says:

    Hi There!

    I have NRE FD deposit. I am planning to invest the interest income in SIP’s. Do I still need to show the accural interest as income and pay taxes in USA.

    I am hoping for a exemption on this as I am investing them in SIPs. Could please clarify and also advice the best possible way.

  193. Hi Ramprasad
    If you are US resident, be careful if you are planning to structure your NRE interest income towards mutual funds SIPs. Off late almost all leading fund houses have stopped taking investments from such customers owing to regulatory challenges.

    Re your question, yes you need to pay taxes in US on your interest income on an annual basis. Even further, US residents are also required to pay taxes on accrued Mutual fund returns annually and is also not considered as a capital gain. I consider it a very punitive tax clause.

    You can email us for further consultation in this regards.

  194. Kanchan says:

    Hi,

    I have been staying in US for 3 years and have regular savings account in india. I have made fixed despoits of 5 lacs in india. Do i need to fill any fax so that the tax is not deducted?
    Please advise

  195. kapil gombar says:

    hi
    i am kapil gombar. i have an NRE a/c in bank of baroda. i made a fixed deposit of fifteen lakh INR under term deposit scheme for 12 months. in past 7 months i got around 70 000 INR as profit. now as i need more money i went for pre mature withdrawal. now bank has given me my money but deducted all the interest i.e 70 000 INR. and return 14 lakh and 30 thousand. also they never informed me that if i go for pre matured withdrawal, they ll take all the interest back. what should i do?

  196. Rekha says:

    I am a US citizen of Indian origin and so are my two adult children who are based in USA.. We have a property in Hyderabad India which we inherited from my late husband in 1984 and now want to sell and hopefully bring all the funds to USA at a later date. Till then is it possible to hold these funds (capital gain) in NRE account maybe FD where it can earn interest?

  197. Hi Rekha
    When you will sell your property, the proceeds will be credited to your NRO bank account. You have an option to transfer the funds from NRO to NRE after getting a certificate from a Chartered Accountant along with some filling some forms. You obviously need to pay taxes on your capital gains before a CA could give you that certificate.

  198. Kanchan
    Ideally you should not be investing in a regular saving account mode. You would need to file Form 15G annually with your bank to prevent them from deducting tax. You may search our blog for Form 15G to get more details on it.

  199. Kapil
    Many banks have a term in their NRE FD account opening form which refers to a penalty of zero interest if the FD is encashed in the first year. If you were not informed about it, you may file a written complaint and see how it goes. The bank must tell you about this penalty.

  200. Rekha says:

    Hi, Thanks for your prompt reply. I do understand that we will have to pay capital gain tax anyway since I and my children are US citizens and US laws require paying of taxes on any global capital gain. However subsequent to this how long I can keep it in an NRE account and get it to USA only when and if I need it?

  201. Rekha
    You will need to transfer the funds to a NRO account after selling the property. The tax will then need to be paid to Indian Govt. Once that is done, you have an option to get the funds credited to NRE account but it will need a few forms and a certificate from a Chartered Accountant to confirm that adequate tax has been deducted. You then have the flexibility to remit it to US without hassles when needed.

  202. Mohan Raj says:

    Thanks for your clear article on NRE fixed deposits. Am I right in saying that regarding Compounding Interest this comes effective only if the period is long ie. more than 1 year.
    Secondly would you identify those banks which offer interest on half yearly or quarterly compounding basis ? Most offer only annualized yield, eg . Indus Ind Bank 4.10% and annualized yield 4.41%.
    Thanks
    Mohan Raj Nair

  203. Mohan Raj says:

    Are FCNR foward contracts taxable ?

  204. PN says:

    Hi,
    I have NRE and NRO accounts with ICICI and SBI banks.And I was thinking which account NRE or NRO should I open my FDs.The reason being ,I work in US and this is my first job in US and I don’t know much about tax implications and tax laws in US.Also,since i haven’t filed my US tax return till now I am not eligible to get TRC from US government to apply for DTAA as of now at this stage.I will be eligible to file for tax returns in april 2015 ,so till then I cannot apply for DTAA.
    My question is :Would you suggest me to invest or open FD with the two banks in NRO account to avoid less tax.I know that if I haven’t submitted the TRC to Indian government under DTAA ,then my TDS will be deducted at 30.9% and I am ok for that,But I am thinking it is better to go for TDS rate of 30.9% by investing in FD in NRO or it is better to invest or create FD in NRE and then pay tax in US?
    Which is better?
    FD in NRE -tax payment for NRE FD Interest in US OR
    FD in NRO -tds at flat rate of 30.9% on NRO FR Interest in India.

    In which FDs I will spend less money on taxes.

    Note:I am not aware about the tax implications in US when we have any NRE FD in India.
    As per your experience and knowledge what would you advise me to do?

    Your reply will be highly appreciated as I have nobody to help or guide me in this regards.

    Regards
    PN

  205. Mahesh says:

    I have 10 lac in my hdfc NRE account and i take out 5 lac and my interest amount is due in oct 2014 do i will get the interest for 10 lac or 5 lac’s.

    i take out 5 lac’s only before one month.

    thanks

  206. Mohan Raj
    Compounding of interest depends upon the frequency at which the bank provides interest. It can be from monthly, quarterly, half yearly or yearly. Generally yearly followed by monthly is most common. You will need to find this with individual banks. Perhaps SBI and ICICI do quarterly interesr option.

  207. Mohan Raj,
    While FCNR interest is not taxable, Forward contract gains are taxable.

  208. PN
    I appreciate your trust in BFA. As per our understanding, you will have to disclose NRE FD interest in your US tax returns and pay the taxes as if they were earned in US. This irrespective of whether you go for NRE or NRO FDs.

    I believe that NRE route may be better on following grounds :
    1. You get money tax free initially. Towards end of the year you work out your US tax liabilities and pay tax in US
    2. There is no hassle of DTAA as India won’t deduct tax on it. Only US taxes would need to be paid
    3. Money in NRE FDs is freely repatriable without any procedural hassles.

    Investing in different banks doesn’t reduce your tax liabilities.

  209. Mahesh I am assuming you are talking about NRE FDs. Before you do the premature redemption, please check with relationship manager for the terms of the FD. It will mention about the terms of premature withdrawal. It will also depend if you have one lump sum FD of 10 lac and if that is the case, the punitive terms will apply to entire 10 lacs.

  210. Rajesh says:

    Hi BFA,
    I’m currently jobless in US. If I do a monthly repatriation from my NRE account, i.e. a total of about 12 inbound wire transfers in a year so that I can pay my bills in US (assuming that I wont get a job in US for the next year), do you foresee any issues from Uncle Sam because of the frequent inbound wire transfers? Note: Each wire transfer could be over $7000.

  211. Rajesh
    I would suggest you to consult a local CPA on this query as this may touch specialist areas of repatriation based taxation if any in USA

  212. Muralikrishnan says:

    Hello

    I am an NRE Savings account holder in ICICI bank and I wish to open an NRE FD for 5 lacs in (2 lacs + 2Lacs + 1 Lacs), Please advice for the below queries
    1.Diference between Cumulative or Traditional FD and which is good for investing?
    2.What is form 16A and if PAN card is not available whether we cant open NRE FD?
    3.Online method of opening the FD is safe or inpersonnel is required?
    4.Rate of Interest is not provided by the ICICI Bank.
    5.whether Principal and Interest will be deposited in the NRE Savings account if I close the FD after maturity of 390 days?

    Below are the details provided by the Bank for NRE FD.

    •To earn Special Rate on your NRE Fixed Deposit, please enter 390 days in the Tenure of Deposit (Days) option given above

    •Tenure of Standard NRE Deposit :
    •Cumulative Deposit: Minimum 1 year, Maximum 10 years.
    •>Traditional Deposit Monthly Interest Payout: Minimum 1 year, Maximum 10 years.
    •Traditional Deposit Quarterly Interest Payout: Minimum 1 year, Maximum 10 years

    Scheme :
    •If you choose Traditional FD Option, the interest will be credited to your Savings Account debited for creation of FD account.
    •If you choose Cumulative FD Option, the interest will be reinvested into the deposit.

    •Central Board of Direct Taxes has issued a circular dated May 13, 2011, stating that all Form 16A will be generated online through the NSDL website. In absence of valid PAN, Form 16A will not be generated online through NSDL website and further benefit of DTAA will not be extended.click here (http://www.icicibank.com/Pfsuser/icicibank/ibank-nri/nrinewversion/images/mailer/panupdation/Lp.html) to know process for PAN updation

  213. Sreejit Chatterjee says:

    Hello

    I am working for the last 2.5 years in Qatar. I have an NRE acoount in India where I remit money regularly, and have opened a few NRE FDs. In this matter, I have 2 questions:

    1. If and when I return to India (permanently), and I get the NRE account converted to a normal S/B account, will the balance in it be counted as income? Will I have to pay tax on it after it becomes S/B account? I am aware that any interest earned in the account from the time it becomes an S/B account, it will be counted as income. However, I am not sure on the tax implications of the principal balance and any interest accrued till it was an NRE account, for that financial year.

    2. Regarding RNOR status, there are 2 conditions – stay in India for 60 days in the current year, and 365 days in the previous 4 years. Are these two conditions required as EITHER, OR or AND?

    Thanks in advance.

  214. Rajesh,
    A US CPA will be better placed to answer this query. Some country have remittance based taxation and you need to check that out for US. However, your NRE FDs are taxable in US and you should be disclosing their interest income in your tax returns already. If that has already been done at your end, any inward remittance from them should not attract any taxation. However, you should consult your US CPA to discuss this in detail.

  215. Raju says:

    Hi,

    I have NRE fixed deposit which will mature in 3 years. I work and stay in Sweden. I heard that India and Sweden has DTAA agreement. Does this mean that I can pay 10% tax in India for the interest earned on NRE fixed deposit and then I don’t need to pay tax in Sweden? Can you please explain how this works?

    Best Regards,
    Raju

  216. Raju,
    We would suggest you to get in touch with a tax advisor in Sweden for the tax implications there. NRE FDs are tax free in India and hence there should not be a rational to pay tax in India.

  217. raviprakash shah says:

    I am working in srilanka I Have NRE account in IOB Delhi. I was open one NRE FD Rs 3 lakhs for two year .my fd was mature on Nov-2014 .fd mature after bank was deduct Rs 10,000 in my mature amount how can possible

  218. Raviprakash,
    The bank can not deduct any amount by way of tax on NRE account. You will need to confirm with the bank why did they deduct the amount.

  219. Madhuri says:

    Hi… i am citizen of india but right now i am in USA. So is this possible that i am eligible to open a new account in icici bank by using online process? Is this safe?

  220. Prakash says:

    Hi,

    I’m an NRI living in UK. I’ve set up NRE account in India recently and planning to hold some £2000 in my NRE FD for 1 yr. Though I’m convinced that I need to pay tax on my interest i earn on its maturity in UK, how do i calculate that as the currency is in INR? Also what are the consequences if I’ll have to keep this for some time and the rupee appreciates as i would’ve paid more in tax but at the time of repatriation I may take only less amount in pounds than what i paid the interest for? How do i mitigate this issue?

    Kind Regards,
    Prakash

  221. ISMAIL says:

    i have FDS open through resident ordinary SB account at Canara Bank, bank is deducting 10% as TDS, i heard this 10% tax will return back if we file IT return, how does it work, what i have to do and would it help me for all the years i have paid income tax.

  222. nitin says:

    My uncle who was working in Uae for past 30 years of hard work. Now he wants to retire & settle down in India. He says he has 50 crore in bank (NRE-FD). At this point he says he needs to pay tax when he arrives & 6 months after that. As he unaware of how tax will be deducted from the interest earned. Could you please tell how is the process & how much interest earned each year & tax is deducted, so i can give information to him too.

  223. Romeo says:

    At present I am NRI and I planing to settle permanently in India. I am having some NRE FD’s for a period of 10 years. My question is that, Do I have to pay tax when I settled down in India permanently?

  224. Madhuri,
    I a. Assuming that you are after opening of NRE account. I believe that you may still need to send the required ID and Address proof docs by post to India.

  225. Prakash
    I believe that ideally you would need to disclose the interest on an annual basis based upon accrual concept. You would need to convert the income based upon the prevailing exchange rate on year end which I suppose is 6 April. I would suggest you to contact an ACA in UK for better tax advise.

  226. Ismail,
    You need to file a tax return for each year to claim a refund. If you are not sure, please take help of a chartered accountant as it is a detailed tax return filing process which can not be answered via a simple few liner response.

  227. Nitin
    The bank would require him to close his NRE FDs and open new resident FDs. He may choose to pay tax via Advance Tax process on a quarterly basis and file annual tax returns. I believe he needs a tax and financial advisor to get the most for his money in a tax efficient way. On 50 cr, he may be liable to pay around 1.4 cr of tax via his current investment route. You can ask him to contact us at info@banyanfa.com for our help.

  228. Sanket Agrawal says:

    Hi, Can you please tell me how is interest earned on NRE FD taxed in USA? I am a resident alien in USA working on a H1B Visa. If an NRE FD pays 9% interest and I have to pay ~35% tax in USA then is it a better option to gift the money to my parents and ask them to invest in FD in their name. Please assist..

  229. Debanjan Das says:

    Can you please give me the exact procedure for repatriation of the fund to USA from India ? Is it specified in the Bank’s rules & regulations ?
    — Debanjan

  230. Hi Sanket,
    You have correctly identified the tax implication in USA. Your way around looks better. The only catch is – if you invest in your parent’s name, there would be a tax implication for them in India, including tax deduction (TDS) if the interest per year is greater than 10K. You would need to file form 15G annually to avoid tax deductions. You can refer our article for more details http://insight.banyanfa.com/form15h-and-15g-tds-deduction/

  231. Hi Debanjan,
    The repatriation procedure depends upon the type of bank – NRE or NRO. For NRE it should be pretty straight forward. You need to give remittance instructions to your bank in their specific format with your US bank details. I would suggest you to contact your relationship manager.

  232. B. Subra says:

    Hello BFA,

    I am an NRI for the past 26 years and cobtinue to be so for the future. I invested in fixed depoisits with SBI more than ten years before, with interest payable on monthly / quarterly. The source of fund is from foreign exchange, which can be proved. The fixed deposit has been in INR and TDS were being deducted by bank credited to my PAN which was considered in my annual tax returns. I have been and continue to submit my annual income tax returns regularly as NRI, I came to know today that interest on NRE term deposit are tax free. My question is
    1. Can I get my deposits reissued as NRE deposits to avoid taxation for future?
    2. Is there any way to correct the previous years income from interest from FD to seek a refund of tax?
    3. Any other advise you mnasy have pertaining to my circumstrsnces
    Thanks and regards
    Subra

  233. Manish says:

    Dear Banyan Fin Adv,
    I opened a 3 year FD, NRE account, in amount of $25000, in 2012 with exchange rate at 50 Rs to Dollar.
    I paid taxes on interests accumulated on yearly basis- Form 8938.
    My FD matured at 62.5 Rs to Dollar.
    Can I claim capital losses on my initial $ 25000 investment that has now lost value by 25 %.
    Additionally, do I need to make any further calculations on the total interest earned based on current exchange rate as compared to what I paid every year for past 3 years.
    Thanks.
    Manish.

  234. Sanjeev says:

    Very useful information.

  235. Abhijit Bukkam says:

    Hi, i am a NRI working in UAE. can you advise if i can transfer money from my nre account to my fathers account who is a resident and a senior citizen. If yes then is there any tax liability to my father? If yes then upto wat extent?
    I am planning to make fixed deposit on my fatheres name to get benifit of higher rate of interest for senior citizen.

  236. manohar says:

    Hi….
    I’m a small invester, planning to buy house wit in 5 yrs I’m saving my money in FD a/c. I came to know bank deducts TDS if interest is more than 10000/- p.a so I opened 3 bank a/c To deposit my money of Rs.3lakh. but in this year my Chit money is metturing and ill get 3 to 5 lakh money now I want to invest in fd. But I don’t like to further bank a/c.
    One guy told me I can deosite in dank if I submit form 15g bank don’t deduct TDS. but he telling I want shiwing IT returns. But I’m not showing IT Returns.
    I want to know if do I fase any problem if I make fd in same bank and submit 15g if I don’t file IT returns further.
    Thank u

  237. Sam says:

    Dear BFA,
    I am US citizen since 2009. Before coming to US, I had some 30 lakhs spread over various resident account in banks, mainly to earn interest and use that interest to pay for LIC policies. Since last 2013 Aug, when Rs took dive, I started moving big chunks into IDBI bank, now hold about 20M Rs NRE FD account in 40 ladder deposits with maturity ranging from 3 to 10 years earning 8 to 9.5% interest.

    (1) What is my obligation to report as taxes to IT dept in India and US ?
    (2) I reported this in US FBAR form but never understood the equivalent $$ income from NRE Rs deposites per year to add to my global income as I haven’t yet received any Rs income credited to my account to report about
    (3) I looking to buy an apartment in 10years and move all cap + int earned into that property. What tax implication/complication it may have ?

  238. savitha says:

    Hi,
    I have a question regarding residential status. Will i maintain NRI status if

    1. I stay less than 182 days in india for tat year and
    2. i have stayed more than 365 days in india for preceding 4 years but less than 60 days in tat year.
    Since i dont satisfy <365 days count for last 4 years, i think staying less than 60 days in india for tat year is suffice to maintain nri status for tat year.
    PLZ note I am permanently going to stay in india and im not returning back to US.
    Thanks.

  239. Hi Subra,
    I am assuming that you have been investing in resident Fixed Deposits which is not a legal way to invest for NRIs. You could get your funds transferred to NRE account after getting a CA certificate. Once the funds are in NRE account, you can get NRE FDs done. You can not make corrections with restrospective effect.

  240. Hi Manish,
    This is a very pertinent point. I would strongly recommend to reach out to your CPA in US to get tax advise here. My view is that a NRE interest would be treated as an interest income and hence capital loss may not apply here. But the possibility to explore is – can the capital loss be adjusted in your overall tax returns !
    Please do share your response once you get an advise.

  241. Hi Abhijit,
    Yes you can transfer the funds to your father as a gift. There should not be any tax liability for him.

    Have you considered other investment options which may give you higher returns than a Fixed Deposit ? You could reach out to us on info@banyanfa.com.

  242. Manohar,
    If your interest income along with other incomes goes more than Rs. 2.5 lacs per year, you need to pay taxes on it. You could submit Form 15G with a bank (has to be done each year) and the bank will not deduct TDS for that year. However, you can submit Form 15G only if your yearly income will be less than Rs. 2.5 lacs. If you are still filing Form 15G, you could face issues with the income tax department for submitting a false declaration in Form 15G and avoiding taxes.

  243. Sam
    Interest income from NRE FDs is tax free and hence no obligation towards IT Dept in India. But definitely you have a Reporting + Tax liability obligation in US. I understand that US IRS requires income tax to be paid on an annual basis on accrual.

    For point 3 – Buying a property does not have any tax implication as you would be using already taxed (tax free) money to buy that property. If you sell it in future, then you would result in a tax implication.

  244. Savitha,
    Please note that residential status query can be complicated. Please can you contact us on info@banyanfa.com

    Thanks

  245. Vikash says:

    Hi I have a question when I was resident , I opened the HUF account and had some income and investments in that account . Now I am working abroad for last 7 years and a OCI card holder. So can I still continue with the HUF account or do I need to dissolve it . In case if I continue can OCI karta can give gift or loan to his HUF account ?

    Thanks in advance for your reply

  246. M S Sundaramoorthi says:

    Dear Sir,

    I have NRE account in Axis Bank which I regularly remit my salary to India. I am aware that there is no any tax deduction on term deposit for NRE account holder. But now I would like to open term deposit in syndicate bank due to more interest if compare with axis bank .

    My question is for tax benefit :-

    Should I open new NRE account in syndicate bank to remit my money or I remit my money to my existing NRE account of Axis bank and further transfer money to syndicate bank by Axis bank cheque.

    Up to how much amount I can remit from Qatar and open term deposit account.

  247. Hi Vikash,
    The residency status of an HUF is decided based upon where the person who is managing it is residing. The presumption tends to be the residential status of Karta. You should ideally open a non resident account for your HUF or get the existing account to be converted into a Non resident status.
    OCI Karta can gift or loan funds to HUF. Any income originating from such a gift will be taxable in the hands of the Karta. Any subsequent income arising from such income will be taxed in the hands of HUF.

  248. Vikash says:

    Hi BFA, Thanks for your response . So, can HUF can open NRE account or has it to be NRO account ?

    Also, I have some FCNR FD accounts . Till now I did not enter these details in Balance sheet as I thought that the Interest earned on FCNR FDs is tax free. But I presume although the interest is tax free I should still show these investments and balance of my FCNR A/C details in my balance sheet in a same way I show for my NRE FDs. What are your views? Should I show the FCNR, FDs and balance of FCNR A/C details in my Balance sheet? If yes, in which column of the Income Tax return because I could not locate it to enter in Foreign currency? Also, does the exchange rate applied for the conversion to be shown in Balance sheet should be of 31st March of the filing year ?

    Thanks in advance

  249. Dear MS,
    You can not open a NRE FD directly in a bank. You need to open a NRE account first. There is no max limit for the remittance and opening of NRE term deposit.
    You can transfer funds from one NRE to another NRE account via a cheque.

  250. […] NRE Fixed Deposit – Should you invest in … – Hi Yogesh, If you can prove that you were born in India (probably via your passport), then you can invest into NRE FDs. You would need to open a NRE bank … […]

  251. Chandra Mani says:

    Dear Sir, I’m a US citizen born in India. If I have a NRE fixed deposit in India, let’s assume for 5 years. For the interest I earn every year on the FD, should I have to show the interest income every year when I file taxes in US or should I only report when the FD matures after 5 years?

  252. […] NRE Fixed Deposit – Banyan Financial Advisors – Hi, While NRE FDs are tax free in India, it doesn’t mean that they are tax free in the respective foreign country where the NRI is resident of. […]

  253. Hi Vikash
    HUF can open a NRO account.
    You should treat FCNR deposits exactly the same way like NRE FDs for accounting purposes. You don’t need to disclose them in Income Tax returns as they are not taxable. Regarding the exchange rate, I would agree with your 31 March rate.

  254. Hi Chandra
    You need to disclose interest income on a yearly basis in your US tax returns irrespective of the FD’s maturity after 5 years.

  255. Ramesh says:

    Hi,

    I have query on NRE Fixed deposit interest income. I was out of India for 4.5 year and moved back to India last Decemeber. During my stay outside India, I opened various NRE FD and now as I back in India, Do I have to pay tax on the Interest earned on those NRE Fixed Deposits ? Can I continue my investement in tax free NRE Fixed deposit ?

    Thanks in advance…

  256. Ramesh,
    NRE FDs become taxable once you become a resident in India. You would need to disclose them in your tax returns.

  257. Anand says:

    Hi
    I have a query, I recently opened a nre FD from my NRE savings account.as I know I don’t need to submit form 15 g but my doubt is that I also have couple of saving bank accounts jointly with my wife. So does that make me eligible tto submit the 15g form. Also does having NRE savings account and normal saving account will create any problem in future?I am a seafarer.
    Thanks in advance .

  258. Anand,
    NRE accounts do not require Form 15G as they are not subject to tax. You should not maintain saving account after you become NRI. Sooner or later your bank will reach out to you to convert your saving account to a NRO account.

  259. Dinesh says:

    Dear sir
    I have a question iam live in uae i have a nre account in sbi sir i do a one fd and one rd from this account so my question is how many rd and fd can i do from this account threw netbanking
    Thanks

    Dinesh singh

  260. Dear Dinesh,
    There should be no limit imposed on your NRE account to prevent you from booking more NRE FDs / RDs from your account via netbanking.

  261. Achu says:

    Hi Sir…
    I am sailing on merchant ships.
    I only have one NRE account.

    1. Can I open residential account? if not can I make a FD in my mothers name say of about 10 Lac. Is there any issue transferring that much money.
    2. Can I open two NRE accounts?

  262. Vishal dhawan says:

    Hi i am australian citizen born in india with oci now.i have nre fds with icici..now i want to invest on sip from nre account..my question is do sip investments attract any tax at maturity if its done from nre account..thanks

  263. Hi Achu,
    You can open multiple NRE accounts. I don’t see an advantage of opening a residential account when you are eligible for NRE account. You can open NRO account instead of residential account.

  264. Vishal,
    You should do SIPs in mutual funds via NRE account only. The taxability of mutual fund investments is not related to investing via NRE account. You may want to refer to this article for taxability of mutual funds for NRIs http://insight.banyanfa.com/tax-implications-of-mutual-funds-on-residents-and-nris/

  265. dheer says:

    Hi In your blog, you mention that the interest can be invested in SIP/mutual funds? How is that possible? Which FD’s let you directly invest? As far as i know the interest is not payable till its matured? I mean we cant take the interest out…Are there banks which allow you to invest the interest in SIP products they offer?
    I currently have couple of NRI FD’s from BoBaroda, but i just get the interest. How can i use that interest to invest in SIP/mutual fund?

  266. xaqtiv says:

    I just modeled the interest income based on avg. interest rate of 9% compounded from 2010 to 2015 for 1 Cr. At the same time I also factored in the depreciation of the rupee against USD. If you were to deposit 1 CR in 2010 in a NRE account and repatriate at end of 2015, you would have lost USD 20K.

  267. manas says:

    Dear Banyan Financial Advisors,

    Myself an indian citizen working in saudi arabia for 5 years.
    I have NRE account in indian bank . This june I will return to India permanently .

    My question

    1. What I have to do with my NRE account?

    2. For example if I have fix deposit of 40 lakhs in NRE account, how much will be tax I have to pay? How can I save this money without giving any tax?

  268. Hi Manas,
    If you return to India – you will have to convert your NRE account into a resident account.If you have NRE FDs in NRE account, the bank may force you to get them converted into Resident FDs. Please scroll through the questions in this post and you will get detailed response to similar queries asked earlier.

  269. Prashanth says:

    I am an Indian citizen who has been working abroad over the last 3 years. If I open an NRE FD i India for 2 years what will happen to the principal+interest when the FD matures? Assuming I dont want to auto renew the FD am I allowed to withdraw it in INR and invest in real estate in India?

    In case I want to repatraite the funds back to my resident country will the exchange rate at which they are repatriated decided by the bank where I had opened the FD or I do I have the option of repatriatig them thru a foreign exchange agency?

  270. Prashanth,
    NRE FD on maturity can be freely withdrawn and invested in real estate. However, once invested into real estate, the money can not be freely deposited back into NRE account.
    For repatriation, the rate of exchange rate applied will be the one which the bank has in place on the date you wan to transfer the funds. You could use a foreign exchange agency, if they accept the funds from your NRE account. You can even transfer the NRE funds from one bank to another bank and then transfer via another bank.

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Delhi – Odd Vs Even Formula

January 2, 2016January 2, 2016

The actual success of the Delhi government’s odd-even formula will be known only by January 15, but if the response of most Delhiities on the first day is any indicator, then the risk taken by Arvind Kejriwal’s Aam Aadmi Party seems to have paid off.

The local government will review the effect on pollution after the 15-day trial and consider including two-wheelers in the second phase of the scheme.

For more click here